Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

MESSAGE FROM THE QUEEN

TAXATION

The VICE-CHAMBERLAIN OF THE HOUSEHOLD reported Her Majesty's Answer to the Address, as follows:
I have received your addresses praying that the Double Taxation Relief (Air Transport Profits) (Cameroon) Order 1982 and the Double Taxation Relief (Taxes on Income) (Zimbabwe) Order 1982 be made in the form of drafts laid before your House.

I will comply with your request.

PRIVATE BUSINESS

LERWICK HARBOUR ORDER CONFIRMATION BILL

WESTERN ISLES ISLANDS COUNCIL (OMNIBUS SERVICES) ORDER CONFIRMATION BILL

Orders for consideration read.

To be considered Tomorrow.

Oral Answers to Questions

DEFENCE

Main Battle Tank

Mr. Farr: asked the Secretary of State for Defence when he expects his Department will complete its evaluation of the new Vickers Valiant main battle tank.

The Under-Secretary of State for Defence Procurement (Mr. Geoffrey Pattie): At the request of the company, and at its expense, proving trials of the Vickers Valiant main battle tank are being carried out at Ministry of Defence establishments. A further report is due to be given to the company shortly.

Mr. Farr: I am grateful to my hon. Friend for that reply, but why is the Ministry of Defence carrying out these trials? Is the Department satisfied, or not, with the performance of Valiant?

Mr. Pattie: The trials are intended to assist Vickers with its overseas sales efforts. Details of the results of the trials are of course confidential to the Ministry of Defence and the company, but I am sure that Valiant will admirably fulfil requirements in many parts of the world.

Defence Expenditure (NATO)

Sir William van Straubenzee: asked the Secretary of State for Defence if he will estimate the proportion of

defence expenditure in the last full year that was attributable to North Atlantic Treaty Organisation commitments.

The Secretary of State for Defence (Mr. John Nott): More that 90 per cent. of our defence expenditure in 1981–82 was related to NATO commitments.

Sir William van Straubenzee: I appreciate that those are very substantial figures, but is it not clear that expenditure on NATO is a vital part of our defence and that those who advocate withdrawal are gambling on the fact that their freedoms, including those of protest, will be guaranteed by others than ourselves?

Mr. Nott: My hon. Friend is entirely correct. More than 90 per cent. of total expenditure by NATO is made by our allies. Therefore, without NATO our defence would be very small.

Mr. John Silkin: While I agree that membership of NATO remains vital for Britain and, indeed, for the free world generally, will the Secretary of State agree that there is or ought to be a change in the whole attitude towards strategy and policy in NATO? Will he further agree that this change is visible and was visible in the United Nations General Assembly yesterday, and can be seen in Germany, Greenland and throughout Europe? It is that we must all work for a nuclear free NATO in Europe and ensure that cruise and Pershing are not deployed inside Europe?

Mr. Nott: No, I will not agree. Whatever political views their Governments may hold, all the countries in NATO agree that its present policies are the best that can be devised for our common defence and the maintenance of freedom. The right hon. Gentleman mentioned the nuclear strategy, but it was NATO, not the Soviet Union, that proposed the zero option.

Mr. Cryer: Is NATO prepared to accept the "No first use of nuclear weapons" concept put forward by the Soviet Union? Will the Secretary of State give an assurance that NATO's headquarters will not be moved to the United Kingdom, because such a move would imply the express acceptance of a nuclear war in Europe, which is unacceptable to our people?

Mr. Mates: Rubbish.

Mr. Nott: No one has ever suggested moving NATO's headquarters to the United Kingdom. I think that the hon. Gentleman must have misread or misunderstood piece in The Guardian. The article in The Guardian to which he referred suggested that the United States European command headquarters might move to the United Kingdom, but that is not contemplated.

Sir Peter Emery: Does my right hon. Friend agree that the Opposition's strong advocacy of the renunciation of certain nuclear weapons means that the West's ability to obtain multilateral nuclear disarmament will be considerably hindered?

Mr. Newens: Nonsense.

Mr. Nott: My hon. Friend is clearly correct. If the Soviet Union feels that it can achieve all its objectives through peace movements in the West it will see no reason to come forward with proposals to reduce its nuclear weapons. The other day I saw with great interest the Labour Party's political broadcast. It was one of the most disgraceful broadcasts that I have ever seen. It hardly


mentioned that the Soviet Union has deployed nearly 1,000 warheads, which threaten us. The whole broadcast was devoted to the West's defences.

Later—

Mr. John Silkin: On a point of order, Mr. Speaker. I inadvertently talked about a nuclear free NATO in Europe. Of course, that does not make sense. I meant a nuclear free Europe, and of course that applies both to NATO and the Warsaw Pact.

Mr. Speaker: It is nice for me to hear that other people, too, make mistakes.

Competitive Tendering (Vessel Repairs)

Mr. Colvin: asked the Secretary of State for Defence if competitive tendering remains the normal method for his Department for securing repair work contracts for merchant ships taken up from trade for the Falklands emergency.

Mr. Pattie: Competitive tendering has not been the method employed by the Ministry of Defence for placing repair contracts for merchant ships taken up from trade for the Falklands emergency. The need to return ships quickly to their owners in order to minimise charter fees has precluded the use of competitive tendering procedures.

Mr. Colvin: Is my hon. Friend aware that British Shipbuilders is using the profits from its Ministry of Defence contracts to subsidise its ship repairing activities and is thus unfairly undercutting free enterprise ship repairers, such as Jefferies Avonmouth Limited, in my constituency? What can my hon. Friend do to ensure that the private sector receives fairer treatment from the Ministry of Defence?

Mr. Pattie: How British Shipbuilders uses its profits from Ministry of Defence contracts or others is primarily a matter for it, or for the Department of Industry. Of the 25 contracts that have been placed for merchant ships that have returned from the Falkland Islands, eight have gone to British Shipbuilders' yards and 17 to the private sector.

Dr. David Clark: Does the Minister appreciate that there is great anger on the Tyne about the way in which the Government have placed contracts with private yards, for the repair of merchant vessels at the expense—according to the Minister's figures, in the ratio of 3:1—of the public yards?

Mr. Pattie: I assure the hon. Gentleman that contracts have been allocated according to the best available capacity and in accordance with what we felt would be the best response to our needs. The hon. Gentleman has advocated repairs being carried out in certain yards on the Tyne and I think that he would accept that we have been able to accede to his request in some cases.

Falklands Campaign (Merchant Ships)

Mr. R. C. Mitchell: asked the Secretary of State for Defence whether he will list those merchant ships currently chartered or requisitioned by his Department for use in connection with the Falklands operations.

The Under-Secretary of State for the Armed Forces (Mr. Jerry Wiggin): Twenty-seven ships are currently

taken up for use in support of our forces on or around the Falkland Islands and four are being prepared for return to their owners. I shall publish the full list in the Official Report.

Mr. Mitchell: I believe that the "Uganda" was recently chartered or requisitioned by the Ministry of Defence. Is it the only merchant ship suitable for the purpose?

Mr. Wiggin: We had a requirement, which we put to the shipping industry. "Uganda" seemed best to fulfil the requirement in terms of price and availability, and we have signed a contract for that ship.

Mr. Cockeram: Will my hon. Friend turn his attention today to a project being discussed by his officials—the chartering of a merchant vessel in which to quarter Service personnel—and will he ensure that the fitting out of the vessel is undertaken in the United Kingdom and not, as happened recently with a similar charter, abroad?

Mr. Wiggin: We would like to give the work to British industry as long as it can meet the requirement and the delivery date. That is essential.

Following is the information:


The following ships are currently taken up for use in support of our forces on or around the Falkland Islands.


"Anco Charger"
"Yorkshireman"


"British Avon"
"St. Edmund"


"British Forth"
"Rangatira"


"British Tay"
"Baltic Ferry"


"British Trent"
"Lycaon"


"British Esk"
"Norland"


"British Tamar"
"Cunard Countess"


"Alvega"
"St. Helena"


"Fort Edmonton"
"Sandshire"


"G A Walker"
"St. Brandon"


"Scottish Eagle"
"Stena Inspector"


"Hans Maersk"
"Stena Sea Spread"


"Fort Toronto"
"Safe Dominia"


"Salvageman"

A further four are being prepared for return to their owners.

Falklands Campaign (Casualties)

Mr. Ashley: asked the Secretary of State for Defence what percentage of the forces sent to the Falklands were killed in action; and how this compares with previous military engagements.

Mr. Wiggin: Slightly under 1 per cent. of the forces sent to the Falklands were killed in action. It is not possible to make valid comparisons with previous military engagements.

Mr. Ashley: How does the Ministry of Defence justify paying the widows of some privates less than it is paying the widows of others, according to where and when their husbands were killed, and that the Ministry pays nothing to the widows of Service men who were killed in the First or Second World War? Will the Minister re-examine the whole question of war widows' pensions?

Mr. Wiggin: The right hon. Gentleman will acknowledge that there have been substantial improvements over the years. As he well knows, the problem with retrospection is simply that of cost.

Mr. Banks: Would there not have been considerably greater loss of life had the decision not been taken to send a task force of sufficient strength to deal with the problem?


Is it not a fact that the efforts of civilians and members of the forces to equip the force and get it under way in fewer than four days represent a remarkable achievement?

Mr. Wiggin: Yes, Sir. Of course, the first part of my hon. Friend's question is hypothetical. However, I think that all commanders were mindful of the need to keep casualties to the absolute minimum.

Mr. Hoyle: Will the Minister say how many of our forces were killed by Exocets and whether the components in them were supplied by British companies?

Mr. Wiggin: The answer to both questions is "No, Sir."

Mr. Viggers: Is it not a matter of shame, which echoes round the world, that the Government of Argentina have failed to accept responsibility for their dead and have made no arrangements for their burial? Has my hon. Friend news of any developments on that score?

Mr. Wiggin: I am afraid that my hon. Friend is right. We are now making plans to ensure that the temporary interment of many of the Argentine dead can be dealt with on a more permanent basis. Unfortunately, we must take on that responsibility. I am making arrangements so that the International Committee of the Red Cross and the Brazilian embassy are consulted about the arrangements that we have in mind.

Mr. McNamara: The Minister may be unable to tell the House how many firms supply parts for Exocet, but he should be able to tell us how many casualties there were as a result of Exocet. Will he be kind enough to do so?

Mr. William Hamilton: Answer the question.

Mr. Canavan: This is a disgrace.

Trident

Mr. Alton: asked the Secretary of State for Defence what is the latest available estimate of the final cost of Trident.

The Minister of State for the Armed Forces (Mr. Peter Blaker): The estimate is £7,500 million, less several hundred million pounds as a result of the decision to process the missiles in the United States.

Mr. Alton: With what moral authority can Britain argue that developing countries should not have their own independent nuclear weapons when we persist with Trident? Does not the hon. Gentleman agree that it would be in the interest of limiting proliferation to abandon Trident? Given the escalating cost of that ruinously expensive project, will he now agree that we may have another debate on this issue?

Mr. Blaker: The subject has been debated in the House frequently, and probably more than almost any other military subject. No one has yet told me of a developing country with aspirations to acquire its own nuclear weapons that would follow our example if we were unilaterally to give up our nuclear weapons. The cost of Trident must be seen in perspective. Its through-life cost will be the equivalent of 12p per week per person in this country.

Mr. Leighton: Would the Minister personally be willing to accept the moral responsibility of pressing the button that would unleash these nuclear weapons and inevitably incinerate untold millions of innocent people?

Mr. Blaker: I do not expect to have to be in the position to take that decision, but it is essential for the Russians to believe that we might be prepared to press the button in the event of Soviet aggression. That is the best way of preventing war, which is our objective.

Mr. Warren: What percentage of the cost of Trident will be spent in this country? Will my hon. Friend ensure that his Department makes every effort possible to ensure that the maximum amount of expenditure takes place in this country and not the United States of America?

Mr. Blaker: I can give my hon. Friend that last assurance. Our latest estimate is that 55 per cent. of the cost of Trident will be spent in this country. In addition, British firms will be entitled to compete for the subcontracting work on the Trident missile. Four hundred British firms have been briefed and sent the necessary information by the Americans.

Dr. McDonald: Will the Minister stop trying to play down the cost of Trident, to the extent that he has in the past, by costing it in terms of chocolate bars? Will he admit that the cost of this immensely destructive weapon will amount to at least 20 per cent. of the defence equipment budget in its peak years? In so doing, it will prevent the replacement of ageing ships and aircraft which this Government will bequeath to the next.

Mr. Blaker: It is an immensely destructive weapon. That is the whole point of it. If the Soviet Union knows that if it commits acts of aggression it will be hit by a Trident missile, it is unlikely to commit acts of aggression. I hope that the hon. Lady will one day manage to grasp that point. Her figure for the percentage of the defence equipment budget is not correct.

Supersonic Fighter Aircraft

Mr. Churchill: asked the Secretary of State for Defence if he will take steps to rectify the shortage of supersonic fighter aircraft available for the air defence of the United Kingdom.

Mr. Trotter: asked the Secretary of State for Defence what total expenditure has been committed by Her Majesty's Government since May 1979 on new naval vessels which they have ordered; and how many vessels this represents.

Sir David Price: asked the Secretary of State for Defence whether he is yet in a position to place new orders for naval vessels on the Vosper Thornycroft yards of British Shipbuilders.

Mr. Nott: I am today publishing a White Paper on the Falklands campaign and, if I catch your eye, Mr. Speaker, I shall shortly be making a statement on this and on new equipment orders.

Several Hon. Members: rose—

Mr. Speaker: If the hon. Members concerned care to wait until the statement has been made, I shall see that they are called then to put supplementary questions.

Military Commitment (NATO)

Mr. Greenway: asked the Secretary of State for Defence if the Government have any plans to increase their military commitment to the North Atlantic Treaty Organisation; and if he will make a statement.

Mr. Nott: In accordance with NATO's target, we are committed to a real increase of 3 per cent. in defence spending until 1985–86. This will enable us to continue to modernise our forces and maintain our defence capability.

Mr. Greenway: Bearing in mind that NATO is a defence alliance, is my right hon. Friend aware of the rumours that the Soviet Union is spending at least £6 million on organisations such as the CND which seek to undermine NATO? Will he seek to improve the quality and resources of the NATO information services?

Mr. Donald Stewart: Where is the evidence?

Mr. Nott: The Soviet Union does not seek to hide the fact that it is encouraging and financing peace movements in the West. It acknowledges that the peace movements are working in favour of its policies. The NATO information service needs more resources, but it is for the member Governments of NATO to be in the vanguard in explaining that NATO is a successful peace movement.

Mr. Denzil Davies: Does the Secretary of State agree that defence expenditure next year, taking into account the 3 per cent. NATO commitment that he has mentioned, the cost of the Falklands operation, and excluding any cost that may appear in the statement he will make today, will be at least 5½ per cent. of the country's GNP, which is returning to the days of east of Suez? Does he agree that that is a completely intolerable and unacceptable burden on public expenditure?

Mr. Nott: That is a rare intervention by the right hon. Gentleman. He complains normally that we are not doing enough. He wants either to keep all the dockyards open or to have more ships. Most of his criticisms are that we are doing insufficient. He criticises us now for spending too much. I acknowledge that his party's programme would cut defence spending by about £3 billion per annum and cause chaos for employment throughout the country.

Mr. Cormack: In view of the crucial importance of NATO to the survival of our freedom, including the freedom to write articles in the press, and in the light of the extremely interesting, well-written and illuminating article by the Leader of the Opposition in The Times today, will my right hon. Friend seek to have the Labour Party's attitude towards NATO clarified?

Mr. Nott: May I try to clarify the Labour Party's attitude towards NATO, as it is a little obscure to most of us?

Mr. Speaker: Order. I think that that would be a misuse of Question Time.

Mr. Nott: I am sorry, Mr. Speaker, I withdraw that remark. It is of course impossible to clarify the Labour Party's attitude on the point during Question Time.

Mr. Christopher Price: In view of the Secretary of State's previous answers about NATO and reports in the press about United States headquarters, why did the Government describe as fundamentally untrue—in the language of Watergate—a report which later turned out to be fundamentally true? Is his Department continuing the policy of misinformation that it conducted during the Falklands campaign?

Mr. Nott: I am not responsible for articles that appear in The Guardian. The main thrust of The Guardian article, as I read it, was that it was the intention of the United

States Government to remove its command headquarters from Stuttgart to this country. That is not the United States Government's intention. The United States Government are arranging to have a stand-by headquarters organised in the United Kingdom to perform certain functions in the event of war. That is entirely different. I should have thought that those were prudent and sensible precautions for them to take.

Later—

Mr. Norman Atkinson: On a point of order, Mr. Speaker. The Secretary of State for Defence said clearly that in his opinion the British peace movement and the CND were part-funded by the Soviet Union. As many Labour Members, including the Leader of the Opposition, are members of CND and active participants—[Interruption.]

Mr. Speaker: Order. The hon. Gentleman must be allowed to continue.

Mr. Atkinson: Many Labour Members, including the Leader of the Opposition, are active participants in the British peace movement. The Secretary of State has implied that we are in receipt of money from the Soviet Union in order to put our point of view. Therefore, Mr. Speaker, I hope that you will rule that such issues, expressed in the way that the Secretary of State did, are completely out of order and should be withdrawn. I hope that both he and the Prime Minister will make a categoric statement to the House to the effect that in no way do they imply that Labour Members are receiving money from the Soviet Union—[Interruption.]

Mr. Speaker: Order. The hon. Gentleman has brought forward a political argument between the two sides of the House, on which I cannot rule.

Agile Combat Aircraft

Mr. Robert Atkins: asked the Secretary of State for Defence whether he will make a statement on his discussions with industry on the experimental programme for the agile combat aircraft.

Mr. Stan Thorne: asked the Secretary of State for Defence whether he will raise in his discussions with industry on the agile combat aircraft the possible total manufacture and the employment implications.

Mr. Pattie: A programme definition study is nearing completion, and negotiations are in progress with a view to placing an early contract with British Aerospace for the demonstration in an aircraft of the technology applicable to a variety of possible future advanced agility aircraft. The agile combat aircraft is a private venture project. We believe the experimental aircraft programme will help clarify the prospects for this and other options.

Mr. Robert Atkins: Does my hon. Friend recognise the importance of the experimental aircraft programme both in terms of its strategic value and the industrial base support that it represents? Will my hon. Friend confirm that the financial arrangements that have been made with the consortium are the same, or confirm those that have been made privately to the industry by the Secretary of State?

Mr. Pattie: I reassure my hon. Friend that at the Ministry we are fully seized of the importance of the


project. I did not fully understand the second part of my hon. Friend's question. I am not inviting you, Mr. Speaker to ask him to repeat it, but perhaps he might care to communicate with me separately.

Mr. Stan Thorne: Will the Minister say that should the ACA project go ahead, a large part of the production will be within the United Kingdom and not in America or some part of Europe?

Mr. Pattie: Should the production, as the hon. Gentleman describes it, go ahead, I imagine that the production will be with the British Aerospace industry. It will enable that industry to make a major contribution to the British defence effort, which is something that the hon. Gentleman is not always noted for supporting.

Mr. Colvin: What funds are being made available by my hon. Friend's Department to Rolls-Royce for further development of the RB199 engine, which is required not just for the ACA but for the air defence variant of the Tornado? Does my hon. Friend feel that the development of that engine will be completed in time for the ACA to take maximum advantage of market opportunities?

Mr. Pattie: Rolls-Royce is now working on the Mk 104 version of the RB 199 engine, which is intended for the ADV version of the Tornado. That variant will certainly be available within the time scale in question.

Mr. Wellbeloved: Does the Minister think that it would be helpful if the new fighter aircraft programme could go ahead on a bipartisan basis, and that it would contribute to that bipartisan policy if the Labour Party gave a commitment not to cancel it?

Mr. Pattie: I am sure that such a commitment would always be welcome, but I hope that the possibility that the hon. Gentleman has in mind does not arise.

Mr. McNamara: I can assure the hon. Gentleman of one thing. He will not be in office when the final decisions are taken. In regard to what the hon. Gentleman said in reply to my hon. Friend the Member for Preston, South (Mr. Thorne), may I say that we believe in a realistic defence policy and not one that is based on Massada without the benefits of a diaspora. Will the hon. Gentleman say what time scale he envisages for this venture?

Mr. Pattie: If we can come back from the top of various mountains in the Sinai desert, the advance experimental aircraft programme is envisaged to take between three and five years.

Royal Navy Dockyards

Mr. Douglas: asked the Secretary of State for Defence if he will make a statement on the implications for organisation and control of the Royal Navy dockyards involved in the reduction in the number of yards.

Mr. Nott: These matters continue to be the subject of internal study. We are at present in consultation with the trade unions on the initial results of this work. Meanwhile, our own consideration of certain aspects of the organisation for the management of ship repair and maintenance matters is continuing.

Mr. Douglas: Does the Secretary of State agree that one consideration is the removal of "Dreadnought" from

Chatham to Rosyth? Will he give an assurance about safety in relation to that type of decision and also an assurance that the decision is based on safety, not on political considerations?

Mr. Nott: I can give the hon. Gentleman a complete assurance that the future of "Dreadnought" and the decision that we take about her will be based entirely on grounds of safety.

Mr. Peter Griffiths: Does my right hon. Friend agree that, in the interests of the remaining dockyards and fleet maintenance bases, it is essential that they have sufficient resources in terms of locally autonomous management and manpower to provide an efficient and cost-effective backup to the Fleet?

Mr. Nott: Yes. I agree with that. My hon. Friend will be glad to know that we are issuing a consultative paper today, which should now be in the hands of the trade unions. This sets out our ideas about the future of Portsmouth dockyard. It is now clear that we snail need additional support at Portsmouth. We are therefore issuing this consultative document to the unions.
Subject to the satisfactory outcome of talks and agreement on flexible working practice, we now envisage 2,800 civilians being employed at Portsmouth naval base—I emphasise the words "naval base"—for essential repair and maintenance tasks, including the updating of weapon systems. There will still be some redundancies at Portsmouth, but what I have stated amounts to a substantial increase of about 1,500, subject to agreement on useful working practices, representing an increase from 1,300 to 2,800 in the naval base at Portsmouth.

Sir Frederick Burden: As it was the obvious intention of the Secretary of State to concentrate full repair facilities overall for surface and underwater vessels at Devonport, will he take account of the fact that "Swiftsure" has been at Devonport for three years and is not yet completed? In view of the necessity for keeping SSNs operational, will he reconsider the situation at Chatham, which can provide those facilities?

Mr. Nott: As my hon. Friend knows, I accept that Chatham has undertaken a valuable task over the years. I am afraid that we cannot give any reprieve to Chatham. It must close in accordance with our previously announced plan. "Swiftsure" is the first of a new class of submarine. The refitting is proceeding in parallel with the development of a new refitting complex at Devonport. One has to consider the effects of the 1981 civil servants' dispute. The management at Devonport has a learning curve, just as Chatham had a learning curve when it started to undertake that work.

Mr. John Silkin: As the Ministry of Defence was saying in 1981 that it would keep Chatham open, what new factor has occurred between 1981 and 1982 that means it has now to close?

Mr. Nott: There has been a substantial change in the manner in which we are planning to look after and support naval ships. We have ended the practice of mid-life modernisation. Devonport had already been expanded to deal with further SSN refits. The pattern of working at all the dockyards has changed. There is nothing to be gained from continuing to have more support for naval vessels than is necessary for the front line.

Cruise Missiles

Mr. Cryer: asked the Secretary of State for Defence if he will make a statement on progress on the installation of cruise missiles in the United Kingdom.

Mr. Blaker: Preparations are on schedule for the deployment of cruise missiles at Greenham Common by the end of 1983.

Mr. Cryer: Will the Minister accept that the courageous women—[Interruption]—whos are blockading Greenham Common have my support and the support of millions of people throughout the United Kingdom? Does he not understand that cruise missiles will endanger these islands because there is no Government right of veto over their use? Is he aware that they represent an escalation of the nuclear arms race? Is he further aware that while he wrings his hands and talks about multilateral disarmament, he is participating in the ever-growing arms race? When will he listen to the voice of the people, which says "No" to cruise missiles?

Mr. Blaker: I do not know whether the hon. Gentleman, by declaring his support for these women, proposes to help or to hinder them. I do not question the sincerity of the women, but I do question their judgment and their knowledge. What they are doing is more likely to hinder the prospects of peace than to help them, and also to hinder the prospects of multilateral disarmament rather than to help them. In regard to escalation, the Soviet Union already has installed 333 SS20s, intermediate land-based missiles, which are capable of reaching the whole of Europe. On the Western side, we have none of an equivalent kind.

Mr. Prentice: Will the Government take every opportunity to make clear to our friends in the United States and elsewhere that the consequences of an occasional well-organised and well-publicised demonstration by a few thousand people is greatly outweighed by the continuing support of the majority of men and women in this country for collective security as the best guarantee of continuing peace?

Mr. Blaker: My right hon. Friend is absolutely right. This is clear, I believe, to our friends in the United States. It is important that we should continue to explain the facts to the people of this country in view of the issuing of inaccurate information by the CND, which I can, if necessary, document. The United States agrees with us in putting high priority on the zero option, which, if adopted by the Soviet Union, would make unnecessary the adoption of any cruise missiles and would mean the abolition of the SS20s.

Miss Richardson: Does not the Minister realise that he does not help his case when he is patronising and condescending—[HON. MEMBERS: "Question."]—about what happened at Greenham Common and the faith and dedication of the women who went there? The women believe that they are helping their families and their children. The Government have never sought the consent of the people for the installation of cruise missiles. It is time that the Government took public opinion into account.

Mr. Blaker: The cruise missile was debated in this House in January 1980. There have been opportunities to debate it frequently since that time. I was not questioning

the good faith of the women who protested at Greenham Common. I was simply questioning their judgment and the likely effects of their action.

Mr. Major: Can my hon. Friend confirm to my constituents in Molesworth that if the Soviet Union were prepared to reduce the SS20s it already has in place there might be no imperative to introduce cruise and Pershing missiles under the present plan? In those circumstances, are not the silly, sincere and misguided women at Greenham Common and Molesworth damaging a genuine chance of multilateral disarmament?

Mr. Blaker: I agree with my hon. Friend about the consequences if the zero option were to be adopted by the Soviet Union. I hope that the Soviet Union will adopt it. I commend to the Opposition the brief words of Mr. Andropov, the new leader of the Soviet Union:
Let no one expect of us unilateral disarmament. We are not naive people. We do not demand unilateral disarmament by the West.

Mr. John Silkin: The Minister of State was quoted in The Guardian today as having said—[Interruption.] I am quoting the Minister of State, who was quoted by The Guardian.

Mr. Robert Atkins: What about Peter Jenkins' article in The Guardian about the Trots in the CND?

Mr. Silkin: As I was saying, the Minister of State was quoted in The Guardian as saying that the women of Greenham Common were undermining Britain's ability to negotiate with the Soviet Union. [HON. MEMBERS: "Question".] The question that I am asking is, when was the last occasion on which the United Kingdom was in the negotiating chamber with the Soviet Union, talking about nuclear weapons?

Mr. Blaker: We are currently in the negotiating chamber talking to the Soviet Union about nuclear weapons.

Mr. Maxton: Where?

Mr. Blaker: In the committee on disarmament in Geneva.

Nuclear Weapons (Accidental Release)

Mr. Michael McNair-Wilson: asked the Secretary of State for Defence what reciprocal procedures exist between the United Kingdom and North Atlantic Treaty Organisation member States and countries bordering the organisation by which the accidental release of a nuclear weapon is notified.

Mr. Blaker: The United States, the United Kingdom and France all have bilateral agreements with the Soviet Union concerning reciprocal procedures for the notification of accidental release of a nuclear weapon. I shall arrange to have these listed with their full titles in the Official Report.

Mr. McNair-Wilson: As the Soviet agency Novosti has said that if a Euro-missile is accidentally fired at the Soviet Union after 1983 it will take instantaneous retaliatory action, what would happen if an SS20 were accidentally fired, today or at any time up to the point of the arrival of those Euro-missiles?

Mr. Blaker: The Novosti press, assiduously followed by the Labour Party, in its party political broadcast—[Interruption]—was wrong in showing that the time


required for a missile fired from Western Europe to reach the Soviet Union would be six minutes. With regard to the accidental firing of a missile, elaborate procedures have been agreed between the Soviet Union and the United Kingdom, between the Soviet Union and the United States, and between the Soviet Union and France, involving the use of the hot line.

Mr. Newens: Does not the possibility of the accidental release of such a missile underline the point that the women of Greenham Common are seeking to make, that it is undesirable for us to have more of these missiles deployed here as that must increase the danger of such a possibility? Will the hon. Gentleman make it clear that there are real dangers here, which these women are fighting against, and will he not smear them, either as naive or Soviet puppets?

Mr. Blaker: I am not trying to smear the women who demonstrated. I simply point out what would be the likely consequences of their action. With regard to accidental release, I have nothing to add to what was said. There are very effective arrangements between the countries concerned, which are regularly tested.

Following are the agreements:

(a) US-USSR—the "Memorandum of Understanding between the United States of America and Union of Soviet Socialist Republic Regarding the Establishment of a Direct Communications Link" (Hotline Agreement)—1963
—the "Agreement on Measures to Reduce the Risk of Outbreak of Nuclear War between the United States of America and Union of Soviet Socialist Republic" (Accidents Measures Agreement)—1971
(b) UK-USSR—the "British-Soviet Agreement on the Establishment of a Direct Communications Line" (British-Soviet Hotline Agreement)—1967
—the "Agreement on the Prevention of Accidental Nuclear War" (Cmnd. 7072) —1977
(c) France-USSR—the "Franco-Soviet Agreement on the Establishment of a Direct Communications Line" (France-Soviet Hotline Agreement)—1966
—the "Franco-Soviet Nuclear Accidents Agreement"—1976.

Defence Ministers (Meeting)

Mr. Frank Allaun: asked the Secretary of State for Defence if he will make a statement on his most recent meetings with other Defence Ministers in Brussels.

Mr. Nott: Along with other NATO Defence Ministers I attended meetings of the Defence Planning Committee, the Nuclear Planning Group and the Eurogroup in Brussels between 29 November and 2 December. We had valuable discussions on a wide range of subjects, and the full text of the three communiqués has been placed in the Library.

Mr. Allaun: What did the Minister say regarding the Soviet offer a fortnight earlier to halve its medium-range missiles? Will the Secretary of State press for negotiations on this rather than support Washington's rejection, or does he wish to encourage further events at Greenham Common?

Mr. Nott: As the Soviet Union has over 900 independently targeted warheads installed, and NATO has no equivalent weapons in place, an offer by the Soviet Union to remove half still threatens us in the West. The offer that it has made cannot be acceptable to NATO. However, this may be a move in the right direction and if we can get the Soviet Union to understand our fears about

its deployments, we shall be making progress. That is what we are trying to achieve by the zero option, which would mean no deployments at all.

PRIME MINISTER

Engagements

Mr. Kenneth Carlisle: asked the Prime Minister if she will list her official engagements for Tuesday 14 December.

The Prime Minister (Mrs. Margaret Thatcher): This morning I had meetings with ministerial colleagues and others. In addition to my duties in the House I shall be having further meetings later today, including one this afternoon with representatives from Scotland about the future of the steel industry. This evening I hope to have an audience of Her Majesty the Queen.

Mr. Carlisle: Does my right hon. Friend agree that when Mr. Basnett says that the unions will threaten insurrection and civil disobedience if the Government do not do what the TUC wants, he does not speak for trade union members as a whole? [Hon. MEMBERS: "Reading".] Does my right hon. Friend agree that most trade unionists support parliamentary democracy and would not agree to direct action as asked for by Mr. Basnett? If the TUC is to play a proper role, should it not seek to reflect more closely the views of its members?

The Prime Minister: I join my hon. Friend in deploring the remarks of Mr. Basnett. I agree with my hon. Friend that the vast majority of trade unionists, indeed all, are fully in favour of the democratic process and wish for a greater measure of democracy to be applied to the trade unions. When it comes to expressing—

Mr. Skinner: What about the chairman of the Tory Party?

The Prime Minister: —their parliamentary views they vote as citizens, not as trade unionists.

Mr. Foot: I am sure that the right hon. Lady must know, with regard to the previous question, that there is no better democrat than David Basnett. It might have been simpler had she replied in those terms. I put to the right hon. Lady a question on a most serious matter. She sometimes claims to be a strong supporter of multilateral disarmament. Will she explain to us why, over the past few days in the discussions in the plenary session in New York, there have been 28 occasions on which Great Britain has either abstained or voted against resolutions that were proposing different forms of nuclear disarmament? In particular, why did Britain vote against the proposal for a nuclear weapons production freeze, proposed by Mexico and Sweden and supported by India?

The Prime Minister: That is the first time that I have heard a Leader of the Opposition say indirectly that insurrection is a weapon of democracy. It is not.
With regard to the vote in the United Nations. the United Kingdom, in company with the majority of its NATO allies, of course voted against the freeze resolutions, because a freeze would simply confirm the superiority of nuclear weapons on the part of the Soviet Union against the West. I do not wish to confirm that Soviet superiority. We wish to have a balance and if cruise


missiles are not to be deployed in this country, the best means to secure that end is to request and ensure that the Soviet Union removes the SS20s.

Mr. Foot: On the subject of Mr. David Basnett, may I tell the right hon. Lady that we will not have decent democrats in this country smeared by her sub-McCarthy methods? On the other matter, how does she expect anyone to believe her claim that she is strongly in favour of multilateral nuclear disarmament when she encourages the Government of her country to vote against every multilateral disarmament proposal?

The Prime Minister: I trust that the right hon. Gentleman will reject the weapons of insurrection and civil disobedience as weapons of democracy. Perhaps he will come clean on that. I also hope that the right hon. Gentleman will understand that to vote for a freeze when the potential aggressor has great superiority is to weaken the defences of this country. That we are not prepared to do.

Mr. Foot: Does not the right hon. Lady understand that it is not only we on this side of the House who favour that freeze, and that there are growing numbers of people in the United States who favour the freeze? Will she open her eyes at last and understand what is happening in the world and try to throw the influence of this country on to the side of genuine disarmament?

The Prime Minister: Genuine disarmament will consist, not in voting for a freeze, which gives the Soviet Union superiority—

Mr. Foulkes: Warmonger.

The Prime Minister: —but in voting for a balance, or a zero option, which is not a freeze, and persuading the Soviet Union to remove the SS20s. Why is the right hon. Gentleman so reluctant to take that simple step?

Mr. Ian Lloyd: My right hon. Friend will be aware that the dictator of Mozambique, Mr. Machel, recently issued an invitation to Cuban troops to enter that country. As my right hon. Friend is aware that the Cubans have a limited logistic capacity and will therefore need to use either Soviet aircraft or Soviet ships, and as the South Africans have clearly said that they will impede such a move, will she take early action to show where we would stand in such a situation before it becomes so serious as to threaten the whole of the Western position in the South Atlantic?

The Prime Minister: I think my hon. Friend is saying that the Soviet Union pursues its aims of Communist domination by force, threat of force, subversion or proxy. My hon. Friend gave one example of domination by proxy. We are against the Soviet Union increasing its domination. We believe in democracy, not Communism.

Mr. David Marshall: asked the Prime Minister if she will list her official engagements for Tuesday 14 December.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Marshall: Will the Prime Minister confirm the report in The Sunday Times this week to the effect that she had decided to save the Ravenscraig steelworks three months ago? Will she now come clean and tell the Scottish TUC and the delegation representing Scottish opinion the whole truth when she meets them later today? Will she

give an assurance that her intention to save Ravenscraig means that there will be no partial closure or rundown now or in the future?

The Prime Minister: I have nothing to add to the reply that I gave last week, save to say that I shall be meeting a Scottish delegation later today, and that my right hon. Friend the Secretary of State for Industry will make a statement—I hope at the beginning of next week—about the future of the five plants.

Mr. Squire: Has my right hon. Friend received notice yet of an intention of the part of several thousands of women to link arms around the thousand or so Russian missiles already installed and pointing at Western Europe? If she has not received notice of that, does she agree that it shows again that CND sympathisers ignore the cause of our problems and concentrate merely on some of the surface effects?

The Prime Minister: I agree with my hon. Friend that the way to ensure that cruise missiles are not deployed is to secure the removal of the Russian SS20s, which are already deployed. Our attention should be directed to that fact.

Mr. John Morris: As the Prime Minister is to spend part of the afternoon discussing steel, will she consider drafting a suitable Christmas message to my constituents? Is she aware that in the Port Talbot travel-to-work area 8,500 people have been out of work for more than six months, and that the Government's special measures for the steel areas, announced more than two and a half years ago, have so far produced a mere 550 jobs? What hope is there for my constituents that they will ever work again?

The Prime Minister: The hope for constituents everywhere is that we can become more competitive. [Interruption.] Hon. Members will not accept the only answer that provides a solution. We must become more competitive so that hon. Members' constituents may make goods and services that appeal to the constituents of other hon. Members, and get a bigger share of both the home and export markets. Without that fundamental truth we cannot gain a larger number of jobs in the country.

Dr. Owen: Is not the vindication of NATO's decision to insist on negotiations over intermediate missiles the fact that the Soviet Union has now made an offer, albeit insufficient, on reductions? Surely that only points to the need for persistence and tenacity in the negotiations over the next nine or so difficult months? Will the Prime Minister assure the House that before the outcome of the negotiations, and before any decisions are taken, there will be an opportunity for this House to decide whether, if the outcome is unsuccessful, cruise missiles will be deployed in this country?

The Prime Minister: I agree with the first part of the right hon. Gentleman's question, that the way to secure a reduction of nuclear weapons and keep our own security is to get a balanced reduction, and that the way to do that is to persist with multilateral attempts at disarmament, as we are doing. On the possible deployment of cruise missiles if the Soviet Union does not remove all its SS20s, my right hon. Friend, now the Foreign Secretary, then the Secretary of State for Defence, made a statement to the House on 13 December 1979. That was followed by a


debate on nuclear weapons on 24 January 1980. That debate ended with a vote in support of the Government of 304. There were only 52 opposed to the Government.

Dr. Owen: Is the Prime Minister refusing—

Mr. Speaker: Order.

Dr. Owen: rose—

Mr. Speaker: Order. I must tell the right hon. Gentleman that he has no more right to behave like that than has anyone else.

Mr. Skinner: Not sitting next to me.

Mr. Adley: In the light of the question that the right hon. Member for Plymouth, Devonport (Dr. Owen) has just posed, does my right hon. Friend think that she would be entitled to ask him, if there were such a debate and the House passed such a proposition, to give a guarantee on behalf of his party that if he ever had any influence on our affairs at any time in the future he would use it to uphold the decision that the House had taken?

The Prime Minister: I may have the right to ask him, but I believe that I should forgo that right. I am sure that the right hon. Gentleman will have heard what my hon. Friend said.

Mr. Harry Ewing: On the Prime Minister's other main theme today, the damage to democracy, does she understand that the fact that many people are now not voting in successive by-elections is a direct result of the feeling of hopelessness among people, for which she is directly responsible? When the right hon. Lady meets the deputation from Scotland today, will she personally apologise to them for refusing to meet them, having completely ignored them on their last visit to London to discuss the subject of steel making in Scotland?

The Prime Minister: In answer to the hon. Gentleman's last question I say "No, Sir". I am meeting a delegation today, comprising many people from Scotland. It would hardly be appropriate for me to apologise for meeting them.

Mr. Nelson: asked the Prime Minister whether she will list her official engagements for Tuesday 14 December.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Nelson: Has my right hon. Friend seen reports today of the 12-month sentence, eight months of which have been suspended, which was passed at the Leeds crown court on a man who pleaded guilty to two charges of raping a girl who was only six years old? Does my right hon. Friend understand that most people will regard such a lenient sentence as wholly incomprehensible?

The Prime Minister: Yes, I do. Indeed, I am one such person. I have been in touch with the Lord Chancellor, as has my hon. Friend the Member for Sowerby (Mr. Thompson), and he has called for all the papers on this case to ascertain the facts. As an interim measure the Lord Chancellor has given instructions to all circuit administrators that in no circumstances is a charge of rape to be listed for hearing except before one of the judges authorised to try murders or before a judge expressly approved by the presiding judge of the circuit.
The Lord Chancellor fully supports the guidance given by the Lord Chief Justice to the effect that, except in

wholly exceptional circumstances, rape always calls for an immediate custodial sentence and that the sentence must reflect the seriousness of the crime.

Mr. Christopher Price: On a point of order, Mr. Speaker—

Mr. Speaker: Order. I always stop questions at 3.30 pm, except when I have said that I shall allow extra time for a given reason.

Mr. Price: On a point of order, Mr. Speaker. On several occasions in this House, I have been told by you that it is out of order to criticise a judge who has made a certain decision.

Mr. Canavan: So have I.

Mr. Price: Is that ruling simply to be applied in one case and not in another? If it is the ruling, it should be applied to everyone, including the Prime Minister.

Mr. Speaker: The hon. Gentleman is correct. I have from time to time ruled that a judge can be criticised only if there is a motion on the Order Paper.

Mr. Canavan: Throw her out then.

Mr. Speaker: I took the view that I did today because no judge was named. I do not know who it was. [Interruption.] The hon. Gentleman may be satisfied that he has outlined what is normally the correct position. [Interruption.] There is no point in pursuing the matter now. The question has been asked and answered.

Mr. Cryer: On a point of order, Mr. Speaker. Over several weeks the Prime Minister appears to have deliberately misled the House in quoting the number of nuclear warheads on both sides. In fact, the figures are—

Mr. Speaker: Order. Points of order are not for that sort of thing.

Mr. Foot: Further to that point of order raised by—

Mr. Speaker: Order. I just ruled that that was not a point of order. Perhaps I have misunderstood the right hon. Gentleman. Is the right hon. Gentleman referring to the criticism of the judge?

Mr. Foot: In view of your reply, Mr. Speaker, to my hon. Friend the Member for Lewisham, West, (Mr. Price) would it not be helpful to the House, both in this and in future instances—the name of the judge and knowledge of the case is in the possession of the House—for you to make a statement on this matter tomorrow so that we can see whether there has been a breach of our rules in this instance? That would guide the House in dealing with such questions in future.

Mr. Speaker: Order. There is no need to wait until tomorrow. The hon. Member for Lewisham, West (Mr. Price) drew my attention to a breach of our rules, which I said had taken place—[Interruption.] Order. The responsibility is mine. I allowed the question and therefore—[Interruption.] Order. I do not intend to speak against competition. I allowed the question. I believe I made a mistake, but I did allow it. Therefore, I can only say to the House that in future the rule will stand and be observed. I hope that that satisfies the House.

The Prime Minister: It may regularise the matter if, as the Leader of the Opposition and the hon. Member for Lewisham, West (Mr. Price) appear to wish, I withdraw


the use of the word "incomprehensible" in connection with that prison sentence. That I do. With all due respect, I stand by the arrangements that the Lord Chancellor has made.

Mr. John Morris: rose—

Mr. R. C. Mitchell: rose—

Mr. Norman Atkinson: rose—

Mr. Speaker: Order. Before I take any further points of order, let me say to the House that there are three important statements to be made as well as two applications under Standing Order No. 9 before we get down to the main business of the day. Therefore, I hope that hon. Members' points of order are genuine. Mr. John Morris.

Mr. Mitchell: Further to that point of order, Mr. Speaker—

Mr. Speaker: Order. Does not the hon. Gentleman understand that when I call a right hon. and learned Member on a point of order, his point of order must wait?

Mr. Morris: Further to the point of order raised by my hon. Friend the Member for Lewisham, West (Mr. Price), was it not obvious to the House—

Mr. Speaker: Order. I have made a statement to the House, which I hope that the House has accepted. We shall not reopen that question, whatever happens. I shall not take further points of order on that question.

Mr. Morris: rose—

Mr. Speaker: Order. If the right hon. and learned Gentleman wishes to refer to another subject I shall listen, but I am not taking further points of order on a matter upon which I have made a forthright statement to the House.

Mr. Mitchell: On a point of order, Mr. Speaker. We were assured earlier that the White Paper on the Falkland Islands would be available in the Vote Office at 3.30 pm. It is now nearly 3.40 pm and it is still not available in the Vote Office. Will you investigate that?

Mr. Speaker: Order. I should tell the House that we have a private notice question before we come to that statement.

Mr. Arthur Lewis: On a point of order, Mr. Speaker. My point of order has been raised previously. From today's Order Paper you will see that 78 questions were tabled to the Prime Minister by Back Benchers on both sides of the House. However, certain right hon. Members, who rarely come to the House—when they do they can always rely on being called—were called, and they asked more than one supplementary question. By doing so they deprived 75 hon. Members of the chance of asking the Prime Minister their questions. There is nothing to stop those right hon. Members from tabling their own questions to the Prime Minister. In future should not those right hon. Members be treated in the same way as every other Back Bencher? They should table their own questions and then they can be called to ask supplementary questions.

Mr. Speaker: I am grateful to the hon. Gentleman for his advice. It seems to me that—

Mr. Campbell-Savours: On a point of order, Mr. Speaker—

Mr. Speaker: Order. It seems to me that hon. Members are being inspired one after another to raise points of order. We must move on to the private notice question.

Yemen (Earthquake)

Mr. Guy Barnett: (by private notice) asked the Minister for Overseas Development if he will make a statement about the recent earthquake in North Yemen and if he will say what preparations the disaster unit in his Ministry has made in order to be able to answer such requests as may be received.

The Minister for Overseas Development (Mr. Neil Marten): An earthquake, believed to have reached the intensity of 6 on the Richter scale, struck the densely populated Dhamar region of the Yemen Arab Republic yesterday. The earthquake lasted about 40 seconds and caused extensive damage to the town of Dhamar and 99 villages in the area. So far as is known, there have been some 2,000 casualties—dead and wounded.
The Yemen Arab Republic Foreign Minister has informed heads of mission that full details of the damage are not yet available. The Foreign Minister is arranging a fact-finding visit by helicopter to the area tomorrow, 15 December. The British ambassador will accompany him. There are no reports of deaths or injuries to British expatriates serving in the Yemen Arab Republic. I have asked the British ambassador, pending receipt of the specific requirements from the Yemen Arab Republic Government, to purchase any locally available supplies that he identifies as being necessary.

Mr. Barnett: I am grateful to the right hon. Gentleman for his statement. The House will be relieved to know that members of British aid teams working in the area are safe. Can he confirm a particularly horrible disaster—the killing of 125 schoolchildren in one school? Can he confirm that an international appeal has been launched by the Red Cross in Geneva? Can he say more about the readiness of his disaster unit and of voluntary agencies such as Oxfam to respond to the situation?

Mr. Marten: I cannot confirm the horrible rumour that the hon. Gentleman mentioned. We are awaiting details of the disaster. Communications are extremely difficult, as the Yemen Arab Republic Government said, because of the mountainous nature of the country. The disaster unit in my Ministry is poised and ready to fly out whatever the Government require, which will probably be tetanus vaccine, plasma, dressings, food, blankets and tents. We shall be ready to go when we get the request.

Mr. Andrew Faulds: Is the right hon. Gentleman aware that his prompt and expeditious attention to the problem will be much appreciated in the Arab world and will go a small way towards offsetting the immense damage that the Prime Minister has recently done to British-Arab relations?

Mr. Marten: Without agreeing with the last part of the hon. Gentleman's remarks, I am grateful for the first part.

Falkland Islands (White Paper)

The Secretary of State for Defence (Mr. John Nott): With permission, Mr. Speaker, I would like to make a statement.
The Government are publishing today a White Paper on the Falklands campaign. It is now available in the Vote Office.
Part I of the White Paper consists of a brief description of the operation to repossess the Falkland Islands; part II analyses the principal lessons to be learnt from the campaign itself; and part III describes the steps which we are taking to make good losses of equipment, to provide for the future defence of the Falkland Islands, and finally the additional measures now proposed to increase the mobility and flexibility of our Armed Forces for future operations in the NATO area and elsewhere.
First, we intend further to improve the airborne and other capabilities of 5 Infantry Brigade for out-of-area operations. It already has two parachute battalions, an infantry battalion and engineer support. To these we have just added an armoured recce regiment and in the course of next year we will add an artillery regiment, an Army Air Corps squadron and certain logistic units.
RAF Hercules aircraft are already earmarked for deployment of the brigade and the fitting of station-keeping equipment to a number of Hercules will give the brigade a parachute assault capability by 1985. Those enhancements should represent a significant improvement to our capability for airborne operations out-of-area. Taken together with the amphibious capability of the 3rd Commando Brigade Royal Marines, they will give us an improved capability to respond to the unforeseen in a flexible and rapid way.
For out-of-area operations we also need an improved air-to-air refuelling, which was of such vital importance in the Falklands campaign.
Subject to final scrutiny of tenders and to satisfactory contractual negotiations, our intention is to add to our tanker fleet by buying from British Airways six Tristar aircraft for conversion into tankers. We plan to convert four of those Tristar aircraft so that they can also carry freight.
This purchase of a strategic tanker capability will enormously increase our existing tanker capacity. For example, a single Tristar tanker will be able to do the work of eight Victor refuelling aircraft in the South Atlantic. It could also carry up to 120 troops, even while refuelling. It will therefore increase the RAF's troop lift; enable easier support and much more rapid reinforcement of the Falkland Islands; and, most significant of all, it will multiply the effectiveness of all the RAF's combat aircraft, including the Nimrod and the air defence Tornados and Phantoms.
As well as greater strategic mobility to be provided by the Tristars, we also need greater tactical mobility and battlefield logistic support. After the loss of three Chinook medium lift helicopters on the "Atlantic Conveyor"—and the Ministry of Defence is participating with Cunard in the design of her replacement—the one medium lift Chinook was invaluable in the Falklands campaign.
To add to the two Chinook squadrons, we now intend to purchase a further eight Chinooks, of which three will be replacements. Each Chinook can carry up to 80 men


and substantial quantities of stores and ammunition. The extra medium lift helicopters will greatly enhance battlefield mobility and logistic support in the NATO area and elsewhere.
As I have already announced, all the Sea King and Lynx helicopters lost are being replaced and an additional six anti-submarine warfare Sea Kings are being purchased for the Royal Navy as well as seven more Sea Harriers, in addition to the replacement of all naval and RAF Harriers lost in the conflict. All these aircraft orders will be subject to satisfactory terms of contract, including price.
In the light of the campaign and the future needs of the Falklands garrison, we must take further steps to improve our air defence capability. Subject to the satisfactory completion of negotiations, we will purchase at least 12 additional Phantom aircraft from the United States; and 24 additional Rapier fire units for the RAF and the Army are to be bought.
The air defence of the Royal Navy must be strengthened by the provision of an organic airborne early warning capability, based on the Searchwater radar, for each of the operational aircraft carriers. We also intend to provide a modern point defence weapon system for all the carriers, the assault ships "Fearless" and "Intrepid", HMS "Bristol", and all the type 42 destroyers—the choice of system is still being studied.
The White Paper describes a number of other new purchases of equipment, weapons and stocks—including a list of the new weapon systems such as Harpoon and laser-guided munitions, purchased during the conflict, which remain as a general addition to our force levels. On the subject of war stocks, we saw again during the campaign the key importance of staying power and of the need to allow for delays in resupply. We plan to increase substantially—by at least £10 million—the number and range of items in the stockpile specifically earmarked for the support of operations outside the NATO area.
I now come to ship numbers and new ship orders. Under the plans set out in Cmnd. 8288, we would have had about 55 frigates and destroyers either running or in refit next year, with no ships in the standby squadron. The total number of ships would have remained at around this level for the following two years but two ships would have gone into the standby squadron by 1 April 1984, and two more into the standby squadron by 1 April 1985. The plan was that by 1989 up to eight ships would have been in the standby squadron out of a total of 50.
With the additional funds now available, and to meet the needs of the garrison, the two standby ships in 1984 and the two further standby ships in 1985 will now remain in the front line fleet for these years.
We are at present covering for the four ships lost in the campaign by running on older hulls but, to sustain our proposals in Cmnd. 8288 for a total force of about 50 ships in the longer term—that is beyond the mid-1980s—new build replacements are needed urgently. We have decided that these replacements should be type 22 anti-submarine frigates and that an improved batch III design, taking account of the Falklands campaign, should be introduced as soon as possible.
Competitive tenders were sought for the first of the replacement ships and for another type 22 frigate already in the programme and not related to the Falklands losses. In the light of the tenders submitted, an order for two new

type 22 frigates of an amended batch II design has been placed today with Swan Hunter, together with an order for a further two replacement ships of the new batch III design from Yarrow (Shipbuilders) Ltd.
Initial design work is in hand for a replacement for the logistic landing ship "Sir Galahad". "Sir Tristram" will be brought back to the United Kingdom and we hope that it can be repaired.
I am also able to announce today, although it is unconnected with the Falklands replacements programme, that an order for two further Hunt class mine countermeasures vessels has been placed with Vosper Thornycroft.
Last year, in pursuance of our policy of modernising the fleet, we spent more in real terms on ships and their weapon systems than for the past 19 years, and almost 50 per cent. more again than in 1978–79. The total value of the ship orders placed today is £585 million. When added to other naval orders amounting to £161 million already placed this year, new naval shipbuilding will be maintained at a very high level.
We plan that the fourth and final Falklands replacement ship will be a further batch III type 22 frigate. It will be ordered as early as possible next year by competitive tender when Yarrow (Shipbuilders) Ltd. has completed the redesign work. Cammell Laird Shipbuilders Ltd. and Vosper Thornycroft (UK) Ltd. will be strong contenders for this order.
The success of last year's review of the defence programme in matching resources to our revised forward plans had already won us some flexibility to make adjustments to the defence programme. The Government have now provided extra funds to meet the additional costs of the garrison and the replacement of all equipment lost.
All the measures that I have announced can be met within the announced defence budget for 1983–84 and the planning totals for later years.
In many respects, the Falklands conflict was unique. We must be cautious, therefore, in deciding which lessons of the campaign are relevant to the United Kingdom's four main roles within NATO. These roles remain our priority, and the modernisation of our forces devoted to them must still have the first call on our resources. The measures that we are taking will significantly strengthen our ability to perform our main defence tasks but they will also increase the flexibility, mobility and readiness of all three Services for operations out-of-area as well as within the boundaries of NATO itself.

Mr. John Silkin: The Secretary of State referred to the success of last year's review of the defence programme—a programme that Sir Henry Leach referred to as
a major con trick and a catalogue of half-truths".
There still seems to be no maritime out-of-area capability in this White Paper. Surely that is the real lesson of the Falklands war.
Will the Secretary of State therefore answer the following questions? First, will he give the real number—not the phoney one—of surface ships that he expects there to be in April 1985? Secondly, how many of those ships will be mothballed—in the standby squadron? Thirdly, does he really believe that the dockyards of Portsmouth, Rosyth and Devonport will be


adequate for a proper maritime policy? Finally, when will he come clean with the House and admit that all of his maritime policy is put at risk by Trident?

Mr. Nott: The right hon. Gentleman says that we still have no maritime out-of-area capability. I thought that the Royal Navy did rather well in the Falklands, which is about as out-of-area an operation as one can possibly imagine. I completely fail to understand what he is suggesting.
I said in my statement that in 1985 we would have about 55 escort ships—destroyers and frigates. That is exactly the same number as we proposed in Cmnd. 8288. There will be none in the standby squadron in 1985 because the four that would otherwise have been in the standby squadron will be involved with the garrisoning of the Falkland Islands.
The dockyards at Rosyth and Devonport are fully sufficient to meet the size of the new fleet. We have gone out of mid-life modernisations and dockyard capacity will be sufficient. I have issued a consultative paper today proposing expansion of the naval base at Portsmouth. It will be used for the care, maintenance, weapon updating and other things that are needed for the fleet, as will Devonport and Rosyth.
The right hon. Gentleman criticises the Government and especially me on our policy towards the Royal Navy. In real terms, we are today spending £700 million more on the conventional Navy than the previous Labour Government were spending. Last year, naval shipbuilding—new ships and their weapon systems—was at a record level for the past 19 years. I cannot see how the right hon. Gentleman can criticise our policy when the party to which he belongs is proposing a massive cutback in defence spending.

Mr. Churchill: I congratulate my right hon. Friend on his statement, especially on the enhancement that he is making for our air defence at home and for the fleet, and for the strengthening of the Royal Navy. Will he confirm that all the items to which he referred will represent a fundamental enhancement to the overall capability of our Armed Forces here in Europe as well as for the Falklands operation?
Will my right hon. Friend expose the right hon. Member for Deptford (Mr. Silkin) when he tries to masquerade as defender of our Armed Forces while representing a party that is committed to chop by one-third outlays on defence?

Mr. Nott: With regard to my hon. Friend's latter point, the right hon. Member for Deptford (Mr. Silkin) and especially the Labour Party are proposing to cut our defence expenditure by one third, yet they qualify that proposal by saying that jobs will not be shed. That is typical of the ambivalence in everything that the Labour Party says about defence. It would destroy our defences. That is becoming increasingly clear to the British people.
I can confirm that the majority of the proposals that I am making today will enhance our general defence capability for use in NATO, for use out-of-area and for the garrisoning tasks that we still retain in the Falkland Islands.

Mr. A. J. Beith: Is the Secretary of State now convinced that our ships will not again be exposed to airborne attack without early warning?

Is not one of the principal lessons of the affair that we are at our most vulnerable if an enemy thinks that we have neither the will nor the means to respond to attack? Does he agree that the withdrawal of HMS "Endurance" created that impression, and that the same impression could be created if NATO does not appear to have the means to respond by conventional strength to conventional attack?

Mr. Nott: I hope that what I have announced will strengthen our conventional defences. I remind the hon. Gentleman that HMS "Endurance" was in the Falkland Islands when she was attacked. Apparently, the deterrent value of HMS "Endurance" was inadequate. The ships that we deployed in the Falkland Islands were necessarily placed within range of land-based aircraft from Argentina. Normally, in a NATO context, we would not place our ships in that position and they would have the protection of land-based NATO aircraft. They would also have the airborne early warning of NATO, which in the Falklands they did not possess. That is why we want to add an airborne early warning facility to our three carriers.

Mr. Neville Trotter: Will my right hon. Friend accept my congratulations upon the increase in the naval strength that will result from the orders? Will he accept also that Tynemouth will be especially grateful for the fact that they were won by competitive tender, with all that that means for the future? Can he assure us that there will be a strengthening of the Navy's back-up by increasing the number of people employed in the dockyards and the bases and the number of sailors remaining in the Navy?

Mr. Nott: Not entirely. It has been my objective to reduce the support side and to put more of the total resources available to the Royal Navy into the front line. The greater the number of support bases and training bases and other such establishments, the less money there is to put into the front line. The pressure, which has not been entirely welcome to my hon. Friends or to the Royal Navy, which has been exerted during the past two years has created a slimmer and, I believe, a better front line. My hon. Friend is right in saying that we went out for competitive tenders. Swan Hunter put in an extremely competitive and attractive bid and, therefore, it won the order.

Dr. David Owen: Is the right hon. Gentleman aware that many Members on both sides of the House who are friends of the Navy will be glad to see the readjustment of the balance and will only regret that it required the Falklands campaign to bring it about? Will he make it clear whether he intends more than 42 surface ships to be running in 1989 with fewer than eight in the standby squadron? Will he give some assurance to those of us who remain very worried that we shall be building insufficient numbers of hunter-killer submarines, especially because of the Trident building programme at Vickers?

Mr. Nott: I think that the priority is to move ahead as fast as possible with the new conventional submarine. The right hon. Gentleman is correct: while Trident is being built, we shall have a pause in the SSN programme. However, our principal requirement is for a new class of conventional submarine, which will be an extremely valuable addition to our force level.
The number of 42 has been much bandied about. It was an estimate of what might have been the number of ships


in the running fleet in 1989 had we placed eight ships in the standby squadron. Cmnd. 8288 made it clear that we were looking to a force level of 50 in the late 1980s, of which we said up to eight might be in the standby squadron. I cannot say what the resources will be beyond the mid-1980s. Therefore, the number of ships in the standby squadron in the late 1980s will be for the decision of my successor. We are adhering to the figure of 55 destroyers and frigates, and they will all be in the running fleet over the next two years.

Mr. Tam Dalyell: Does the right hon. Gentleman recollect the only public utterance of Lord Carrington since he left office, which appeared in a letter to The Times of 18 June, which was headed "Mr. Nott and Submarines", in which he denied that he had prevented the Secretary of State from sending submarines to the South Atlantic on the ground that it might be provocative? Lord Carrington cuttingly ended his letter to the effect that Mr. Nott could testify that what he was saying was true. How does the right hon. Gentleman reply to Lord Carrington's rebuke?

Mr. Nott: Lord Carrington did not prevent me from sendingg any submarines to the South Atlantic. His letter was perfectly correct.

Mr. John Peyton: Is my right hon. Friend aware that his announcement of the extra six Sea King helicopters that are to be ordered is extremely welcome and will be taken as a further and proper acknowledgment of the way in which the aeroplane performed in the South Atlantic?

Mr. Nott: The Sea Kings performed extremely well. They were operating for very long hours and they were a great success. I hope that the Sea King replacement programme will come on to follow the present generation of Sea Kings.

Mr. Dick Douglas: Will the Secretary of State give us some more information than he gave to the right hon. Member for Plymouth, Devonport (Dr. Owen) about submarines? Surely it is not good enough for him now to say that we shall crowd out SSN building because of the Trident programme when we still await a conventional design. In paragraph 314, reference is made to the inter-relationship of the merchant navy and the merchant marine with the naval capacity overall. Can the right hon. Gentleman be more forthcoming about his ideas on that score?
The right hon. Gentleman referred earlier to the issuing of a discussion paper between his Department and trade unions on the future of the dockyards. May the contents of that paper be made available to the House so that we can have a proper discussion about the yards?

Mr. Nott: Yes, I can place the consultative paper in the Library; that can be quite easily done. There are many functions which conventional submarines can perform better than hunter-killer nuclear submarines. The need now is to build up the number of conventional submarines. We are moving forward as fast as we can with the new SSK programme. We shall put as much money into that programme as is necessary to bring it forward. That is the submarine priority and not more SSNs. The relationship between the merchant marine and the Royal Navy was

proved during the Falklands campaign. It worked admirably, and I should like to consider every means of developing it further.

Sir David Price: I welcome my right hon. Friend's announcement that he intends to order four new type 22 frigates. Will he explain why, after the successful launch of HMS "Gloucester", a type 42, at Woolston, no orders have gone to Vosper Thornycroft, which is one of the two designated warship builders in British Shipbuilders? Are we to take it that the Carrington arrangements no longer hold?

Mr. Nott: Vosper Thornycroft would have been given some orders if it had come in with a competitive bid. We must put these orders out to competitive tender. Swan Hunter came in with a price which was far lower than that which was arrived at by Vosper Thornycroft and Cammell Laird. If Vosper Thornycroft had come in with an attractive price, the order would have gone to it. We have placed two orders with Vosper Thornycroft today for the Hunt class, which is a significant order for Vospers. I hope that it will come in with a more attractive offer when the last replacement ship is put up for tender in the spring. The Ministry of Defence will not spend more money on placing orders with uncompetitive tenderers. It will go to the yard which offers it the best price.

Mr. Tony Benn: Is the right hon. Gentleman aware that the main lesson of the Falklands conflict is that, after 1,000 casualties and probably £2 billion or £3 billion of expenditure, the future of the Falkland Islands is far from settled? France and Germany have resumed arms supplies to Argentina and the United States has voted against us in the United Nations. Almost everyone except the Prime Minister realises that the exclusive sovereignty of Britain over the Falkland Islands cannot survive much beyond this decade. Will the right hon. Gentleman say something about the Cabinet's discussion about its political failure, which it is trying to obscure behind a military success?

Mr. Nott: The right hon. Gentleman has made his point. I am not aware of any of those matters. The Falkland Islands are British, and so they will remain.

Mr. Antony Buck: Does my right hon. Friend agree that the main lesson of the Falkland Islands is not that suggested by the right hon. Member for Bristol, South-East (Mr. Benn), but the conclusion in his White Paper that what we did there has given credibility to the entire Western defence posture? We shall take arms to assist those who wish to remain living in freedom, even if they are on the other side of the world.

Mr. Nott: I agree entirely with my hon. and learned Friend. Our action to recover the Falkland Islands has been an example to the entire West.

Mr. Frank Allaun: Does the Secretary of State deny the fact that the total bill for the Falklands war and its aftermath is £2½ billion, or £5 million per family on the Falkland Islands? Does it save the taxpayer a single pound if this colossal waste comes from his budget rather than that of the Chancellor of the Exchequer.

Mr. Nott: I do not have in front of me the exact figure for the cost of repossessing the Falkland Islands, but it was about £700 million to £800 million this year. The hon. Gentleman is correct to say that the cost of replacing all


the equipment that we lost will be substantial. Clearly I would be the first to say that this incident should never have happened. However, it did happen and it was a remarkable achievement by our Armed Forces. It showed that Britain was resolute in the way in which she recovered the Falklands. That has strengthened the deterrence of the West, which should please the hon. Gentleman, because it has made war less likely.

Mr. Peter Viggers: I thank my right hon. Friend for his statement and for the increased flexibility and enhanced maritime commitment that it implies. As to the number of men employed in the Royal Navy, there remains on the record a signal from the First Sea Lord showing that the number of men in the Royal Navy would run down from 70,000 to 62,000, or possibly 60,000, by 1986 and that the diminution would continue at about that level. Does my right hon. Friend agree that the increase in the number of ships requires a larger number of Navy personnel?

Mr. Nott: The White Paper does not give details of the revised manpower requirements of the Royal Navy because that will take some time to work out. A signal has been sent to the fleet today by the Second Sea Lord explaining that we cannot give firmer figures for a few months. The reductions in shore establishments and the undertaking of more training afloat will reduce the numbers necessary to man the front line. The type 23 frigate will have a much smaller complement of men. Therefore, although the 4,000 redundancies that were originally contemplated will now be less than they might otherwise have been, there are likely to be some redundancies in the Royal Navy and the size of the Navy will decline, probably much in line with the figure given in Cmnd 8288.
The only way in which we can stop the decline is by cancelling some naval programmes. We have a choice between equipment and manpower. With the funds available, we believe that the right balance has been struck, but we can keep more people in the Royal Navy only if we cut the programme.

Mr. Jack Ashley: If we leave aside the earlier differences about the operation of the task force, will the Secretary of State now recognise that Britain has become bogged down in a military, economic and political morass in the Falkland Islands that is damaging rather than helping the national interest?

Mr. Nott: I am sorry, I did not understand who was becoming bogged down—[HON. MEMBERS: "You."] What I announced today will substantially increase our Armed Forces' capability generally for operations in NATO and elsewhere. The right hon. Gentleman will welcome that.

Sir Philip Goodhart: As my right hon. Friend this afternoon and on earlier occasions has paid eloquent tribute to the excellent work of our helicopters, can he tell us now whether he is carrying out a review of the projected helicopter strength in the British Army of the Rhine as in earlier plans there was to be only a comparatively small increase in years to come?

Mr. Nott: Yes. There are some interesting thoughts about that matter. As my hon. Friend knows, we are considering the possibility of using some older Wessex helicopters for the 2nd Division based in York. I would

wish to see more helicopters in the reserve elements of the BAOR and in the BAOR itself. The new Chinook squadrons that are now coming into service will enhance enormously the helicopter lift of the BAOR.

Mr. A. E. P. Duffy: Is not the main lesson of the Falkland Islands that the Secretary of State for Defence could not have deployed so quickly or effectively but for the naval assets that he inherited from the Labour Government? His statement this afternoon is a justification not only of the Labour Party's perception of the size and shape of the fleet, but of the main priority areas that he verified this afternoon. It had taken him three and a half years to endorse the type 22 frigates, the MCMVs and the modern point defence for high value assets. Will he say something about the dual use and adaptation of merchant units such as the Arapaho project?

Mr. Nott: I hope that, after many years of delay, we can move ahead with the Arapaho project during the next year or so. I wish to include that project in the programme. The fact that the Government have put up money for the "Atlantic Conveyor" replacement is evidence of our interest in this area. I wish to put more money into the Arapaho project.
The hon. Gentleman inherited naval assets from the Conservative Government, so his argument is non-productive. The Royal Navy will continue to perform a valuable function under all Governments. Last year, before the Falkland Islands incident, we spent more in real terms on naval shipbuilding and weapons systems than had been spent for 19 years. There is nothing of which the hon. Gentleman can accuse this Government.

Several Hon. Members: rose—

Mr. Speaker: Order. I propose to call four more hon. Members from either side and then to move to the second statement.

Mr. Julian Critchley: I welcome my right hon. Friend's statement, but he will be aware that it is calculated that, by fiscal year 1985–86, there will be under-funding in defence spending of about 15 to 20 per cent., due in part to Trident, in part to the Falkland Islands and largely to the rising costs of men and equipment. What advice does he have for his successor?

Mr. Nott: I have no idea from where my hon. Friend gets that figure. I am not sure to which under-funding he refers. We have planned for the next decade in accordance with the normal long-term costings of the Ministry of Defence. The programme is fully funded, well known and set out in the annual White Paper. I know of no under-funding.

Mr. Bruce George: The White Paper and the Secretary of State's statement do not argue conclusively that it is possible to pay for the improvements of our maritime contribution to NATO, the air defence of the United Kingdom, our out-of-area capability and the replacement of Polaris. Will the Secretary of State come to the House in future with more detail than he has provided so far about how the Government propose to carry out two-thirds of what is contained in this document?

Mr. Nott: The hon. Gentleman knows that we tackle all those matters annually in the defence White Paper. We shall again next year give a full description of what we are doing. We are meeting all the main NATO roles. Of


course, I would wish to do more in all roles, but with a 3 per cent. real increase a year there is a strain on the economy. We are improving all four roles and our allies believe that we are doing a good job.

Miss Janet Fookes: In welcoming the replacement of surface vessels, may I remind my right hon. Friend of the fire hazards revealed during the Falklands campaign about which the Royal Navy had previously warned? Will my right hon. Friend give assurances as to the type of electrical wiring to be used in the new designs, about the use of aluminium in the superstructures and about the use of materials for bedding and clothing?

Mr. Nott: Aluminium and PVC wiring have not been used in the construction of modern ships. My hon. Friend is right to say that they caused problems in older ships during the Falklands campaign. Much work has been carried out on the survivability of ships, and all such lessons shall be incorporated in the new ships that we are ordering.

Mr. Gavin Strang: The cost of the defence of the Falkland Islands has been estimated at £3 billion over four years. Does the Secretary of State recognise that the best contribution the Government could make to our defence would be to secure a negotiated settlement with Argentina on the future of the islands, thus ending the haemorrhage of resources and the risk of further human losses on the islands?

Mr. Nott: I have always taken the view—I did during the time of the Falklands conflict—that we want a long-term accommodation with Argentina. The Falkland Islands must be secure so that the Falkland Islands may exist in peace with their neighbours.

Mr. Keith Speed: I welcome some of the positive statements that my right hon. Friend has made this afternoon. Can he assure the House that new and existing ships will have their weapons, sensors and communications modernised from time to time, even if mid-life modernisation is no longer foreseen?

Mr. Nott: I entirely agree with my hon. Friend that we must be able to update those systems. We already have a substantial modernisation programme for the items that my hon. Friend mentioned, but he is right in saying that, as far as possible, we must be able to replace such items in ships in the running fleet—[HON. MEMBERS: "Why was the hon. Gentleman sacked?"] It is not within my power to sack my hon. Friends. My hon. Friend was a most valuable member of the Ministry of Defence. I can give my hon. Friend the assurance he seeks.

Mr. R. C. Mitchell: Is the right hon. Gentleman aware that the specialist warship building yards, such as Vosper Thornycroft in my constituency, maintain expensive design teams that increase their overhead costs, thereby placing them at a distinct disadvantage when competitively tendering for type 22s and other ships with yards such as Swan Hunter which do not have such expensive overheads? Does he want to see the specialist warship building yards break up their design teams?

Mr. Nott: I am unable to get involved in a debate on whether the design teams of Vosper Thornycroft are too

large. I am a customer. I put out tenders and receive bids. It is for British shipbuilders, not for me, to decide how they organise themselves so that they offer the lowest possible price.

Sir Frederick Burden: Is my right hon. Friend still of the view that the SSN submarine is our most important naval weapon, as stated in the 1981 White Paper? Was the delay in refitting and refuelling "Swiftsure" due to the fact that it is a new type of SSN? How different is it from "Churchill", which is being refitted and repaired at Chatham within two and a half years while it is taking more than three and a half years to refit "Swiftsure"?

Mr. Nott: I have already answered that question. It would not be right to take up the time of the House by answering it again.

Mr. Frank Field: Does not today's statement indicate a further cut in the size of the Royal Navy? Is it not true that long before the Falklands campaign, the Government made a commitment to place two major orders for type 22s? With four ships sunk during the Falklands campaign, that makes a total of six. Today the right hon. Gentleman has announced orders for five. What about the other order? Although the Minister and his colleagues often make complimentary remarks about the performance and workers of Cammell Laird, does he realise that words, however complimentary, are no substitute for orders and jobs?

Mr. Nott: I realise that Cammell Laird will be disappointed that it has not secured any of these ship orders. There is one more to come and I hope that Cammell Laird tenders successfully for it. One type 22 frigate was in the programme, and I have today confirmed that order, which I announced previously. I have also mentioned four replacement ships. No other type 22 frigate is in the naval programme at present, nor has there ever been.

Mr. Denzil Davies: Does the right hon. Gentleman recollect that when, on becoming Secretary of State for Defence, he announced the naval cuts he said—I think that I quote him properly—that defence policy was over-extended and unbalanced? In view of the extra costs he has announced today, the other costs of the Falklands operation and the decision to buy the Trident II missile, does he agree that the defence policy is now even more unbalanced and over-extended? All that he has done today is to hand over the problems to his successor, and there will have to be another fundamental review of defence policy. In view of that, is he not relieved that he had the prescience about 15 years ago to tell his wife that he would leave active politics at the end of this year?

Mr. Nott: I do not think that that has much to do with the Falklands White Paper. When I became Secretary of State for Defence, I said that the budget was over-extended. We had far greater plans within the programme than we had resources to meet them. It was therefore necessary to hold the review that I conducted. The right hon. Gentleman would naturally expect me to believe that the programme is now in better order and better balanced than it was. I expect him, as Opposition spokesman, to take the opposite view. Unfortunately, I am unable to agree with anything that he has said.

Mr. John Maxton: On a point of order, Mr. Speaker. I appreciate that you have limited the time for questions on statements, and that some of us have inevitably not been called, but you have called the spokesman for the Liberal Party and the spokesman for the Social Democratic Party even though they fight every by-election and local election as one party and have made it quite clear that they intend to fight the next general election as one party.

Mr. Speaker: Order. I did exactly the same in the last Parliament when there was an understanding between the Liberal Party and the Government of the day.

Sir Frederick Burden: On a point of order, Mr. Speaker. My right hon. Friend, in replying to my question, made a terminological inexactitude, as will be shown in Hansard tomorrow. He did not make an accurate statement regarding submarines.

Mr. Speaker: That is a matter of opinion; it is not a point of order.

Foreign Affairs Council

The Secretary of State for Foreign and Commonwealth Affairs (Mr. Francis Pym): With permission, Mr. Speaker, I will make a statement on the Foreign Affairs Council which met in Brussels yesterday. This was the last Foreign Affairs Council of the Danish Presidency, and I should like to express my appreciation of the chairmanship of the Danish Foreign Minister.
The Council agreed that the Community should continue to participate in the multi-fibre arrangement on the basis of satisfactory new bilateral agreements. A separate statement is being made in another place by my right hon. and noble Friend the Secretary of State for Trade which my hon. and learned Friend the Minister for Trade will shortly repeat to the House.
The Commission reported on its talks on 10 December with the American Secretary of State and a number of his Cabinet colleagues on a wide range of trade matters. Both sides agreed on the importance of avoiding disruption of world markets for agricultural products. There will now he a programme of bilateral discussions on specific problems.
The Council agreed on the steps to be taken in trade relations with Japan. The full text is being deposited in the Library of the House. The main features are a decision to take the case submitted by the Community in the GATT to the second stage of the dispute procedure, to extend import surveillance and to reinforce pressure both for an increase in imports into Japan and for effective and clearly defined restraint of Japanese exports in certain sensitive sectors. There will be a report before the Council at its next meeting.
These measures represent a clear signal by the Community to the new Japanese Government that more action on their part is now urgently required to redress the trade imbalance.
The Commission gave a detailed statement on the problems of the 1970 EC-Spain agreement, which we requested at the November Foreign Affairs Council. It stated its intention of approaching Spain to seek better implementation of the agreement, and undertook to discuss the tariff imbalance with the car industry. We made it clear that we expected early and effective action to remedy the unbalanced trade relationship, and asked the Commission to report again to the January Council.
Ministers discussed the negotiations for a new trade regime between the Community and Cyprus in 1983. We, in common with a majority of our partners, pressed for an improvement in the arrangements being offered to Cyprus. No agreement was reached, and the existing regime will be extended automatically for a further six months.
The Council also discussed the internal market and identified the initial priority areas for work. It was agreed to hold special sessions in the new year to resolve outstanding problems. My hon. and learned Friend the Minister for Trade made clear the importance we attach to early progress towards the completion of the internal market for both services and goods.
It was agreed that a committee of three scientists should urgently review the cost effectiveness of the Super Sara project and produce a report for a final decision early in the new year.
There was further discussion of measures to restore stability to the steel market. Support was given to the Commission's actions to strengthen the price regime.
Discussion of the European Parliament's proposals for a common electoral system showed that a number of difficult problems remained. The Council agreed to look at the question again at its next meeting in January.
The Council agreed a duty-free tariff quota for newsprint for 1983, but to our regret was unable to agree to a small supplement in the 1982 quota.
In the margins of the Council, Ministers met in political co-operation to discuss recent developments in Poland. They concluded that it would be premature to form conclusions now on the implications of the measures announced by the Polish Government. We will keep in close touch and continue to follow the situation closely.

Mr. Eric S. Heffer: I thank the right hon. Gentleman for that statement, but as it is wide-ranging I hope he will forgive me if I do not follow exactly all the subjects that he raised.
I should like to put four major points. Does he not agree that the Community's position is extremely hypocritical in the sense that, while it is protectionist on agriculture through the CAP, it demands free trade for industrial goods? If import penetration by the Japanese is so damaging—and we all agree that it is—will the Government follow the logic of that and accept that import penetration from Community countries into Britain is equally damaging, especially in such key sectors as steel and motor vehicles, and particularly bearing in mind that production in manufacturing industry is at its lowest level for 15 years?
I am sure that the whole House will congratulate the new Spanish Government led by Felipe Gonzalez, the leader of the Spanish Socialist Party. As France seems certain to block Spanish entry until the problem of Mediterranean agriculture is sorted out, what is the Government's attitude? Does the Secretary of State believe that in its present form the CAP could survive the entry of Spain and Portugal? Has he any projections of the budgetary implications of Spanish accession? In other words, how much will it cost?
Did the right hon. Gentleman see this week's Sunday Times magazine, which included photographs of the destruction of fruit and vegetables because of CAP policy? Is he aware that many people in Britain cannot afford to buy those fruit and vegetables and that there is starvation in the Third world? Is it not disgraceful that such a thing should happen?
It is clear that a decision is needed by the end of December on the re-scheduling of Polish debt. What position do the Government adopt, especially as Lloyd's Bank, with the support of the Bank of England, is prepared to grant a loan to the Fascist junta in Argentina? What implications will the "wait and see" policy have for the Polish economy and the world banking system?

Mr. Pym: The hon. Gentleman drew a contrast between agricultural policy in the Community and the attitude to other trade. There is no doubt that that was the main subject discussed between the Commission and the United States. The United States Government also give much support to their farming industry. The conclusion

was that they must examine this problem in great detail, and that not much progress will be achieved by criticising each other across the Atlantic.
As the hon. Gentleman knows, we have criticised many features of the CAP. The most significant is the way in which it contrives to create surpluses. That is a great problem within the CAP. Although we have not yet been successful in altering that policy, it remains our first objective—as it was with the previous Government—to put that matter right. That will no doubt be a major problem in the future.
We want Spain to accede to the treaty, and France has made it quite clear that she also wants Spain to accede. However, there will be problems, particularly over Mediterranean agriculture, which are in the process of being sorted out in the discussions on accession. Similarly, discussions are at present taking place on the budgetary implications. The Community members feel that we should examine all these issues before accession is achieved.
The Spanish Foreign Minister made a statement on the Spanish Government's position at the Foreign Affairs Council to the effect that they gave a high priority to Community accession.
I share the hon. Gentleman's view about fruit and vegetables. It is unfortunate when events such as the one he described take place. This is another aspect of the CAP that we are constantly trying to reform.
We are in touch with our partners about Polish debt. That is one aspect of the Polish situation, and it is at present being considered with the United States and with other Community countries.

Mr. Michael Latham: Are we not proceeding at an absolute snail's pace regarding Japan, with more consultations and discussions? Is it not time for some action? How much longer will we put up with the French internal protection campaign without doing something about it?

Mr. Pym: On my hon. Friend's first question, the Council took the matter a stage further and agreed to go to the second stage of the disputes procedure. I do not think that that has been done before. It is a significant change, and it is much more effective because it has been done by the Community as a whole rather than by Britain on her own.
I assure my hon. Friend that some of the actions that have been taken inside France are now under review by the Commission, and the Government are watching the matter carefully.

Mr. Russell Johnston: The right hon. Gentleman referred to a number of difficult problems over the common electoral system proposed by the European Parliament. Will he be more specific about the problems that the British Government perceive as important? Is it not a fact that the Government are using technical objections to mask their outright opposition in principle to a proportional solution even though everyone else agrees that that is the only fair outcome?

Mr. Pym: It is no secret that we have reservations about changing the basic system of elections in this country, but many other issues divide the other Community members who have already adopted a PR


system. They cannot agree on the system they want to adopt. Today, there are many differences between members of the Community on this fundamental matter.

Mr. Nigel Spearing: What has happened to the Genscher-Colombo proposals for so-called European union? Where have they got to, and in what form will they re-emerge and when?

Mr. Pym: They will be considered when the Presidency is transferred from Denmark to Germany. That plan will be proceeded with during the next six months. What will emerge I cannot say.

Sir David Price: My right hon. Friend mentioned measures concerning the continuing imbalance of trade between Japan and Europe. Has any progress been made with our European colleagues in considering the possible use of anti-dumping measures should those earlier measures that he announced prove unsuccessful? In the meantime, is he aware that if each of us were to buy British rather than Japanese we would forward the cause of European self-sufficiency?

Mr. Pym: I agree with my hon. Friend on the last point. The problem with Japan is not so much dumping as the limited extent to which the Japanese will permit imports and the ruthlessness with which they export their products. Dumping is not the main problem, but it is an aspect that certainly has been considered.

Mr. D. N. Campbell-Savours: I recognise the nature of the international recession, but what particular measures is the Foreign Secretary impressing upon his European partners to introduce specifically to boost world demand? Or does he believe that we can end the international recession by not boosting world demand?

Mr. Pym: Although that extremely important subject was not on the agenda of the Council, I did on this occasion in the margins take an opportunity, as I do at every meeting, to talk to my Foreign Minister colleagues on this critical subject. It is now very much in the forefront of people's minds. It is written about and commented upon a great deal. Western leaders and Western Finance Ministers are exercising their minds very much to see what further steps can be taken to improve the international framework and structure to enable growth to return to the world economy.

Mr. Robert Maclennan: Did the Foreign Secretary and his European colleagues take the view that Japanese import penetration is not due to their taking our Prime Minister's advice about greater competitiveness, but is due to a breach of GATT? Why do the Government and the European Community proceed at this snail's pace, as the hon. Member for Melton (Mr. Latham) said, and move from A to B, and not take a leaf out of the book of the United States Administration, who have shown a determination that has already brought positive responses from the Japanese?

Mr. Pym: I can only say that I hope that the decision we took and the steps that we shall take will have the effect that the hon. Member for Caithness and Sutherland (Mr. Maclennan) and I wish to see.

Viscount Cranborne: Did the Council discuss trade with the Soviet Union? I refer particularly to a common approach between the United States and the EC over exports to the USSR, especially of technology.

Mr. Pym: The studies on East-West trade that are now to be undertaken are on a much wider basis than just the European Community. Of course, the European Community has a part to play in them. In so far as those discussions and studies relate to Community competence, the Community must have a position. We discussed that position. We had no difficulty in arriving at a procedure by which we can feed the Community view into the wider studies.

Mr. Gavin Strang: Do the Government attach a high political priority to the accession of Spain?

Mr. Pym: Yes, indeed, Sir. Spain, like her neighbour Portugal, has become a democratic nation. We believe that it is undoubtedly helpful to nurture the democratic process in those two countries by accession to the European Community, which is a collection of democratic countries. We believe that on a political basis it is a strength to Europe that they should join.

Mr. Anthony Nelson: Is my right hon. Friend aware that one of the largest manufacturing companies in the world—Caterpillar Tractors—has recently decided to transfer its production of fork lift trucks from the United States to Britain? Is it not important that in order to retain the prospects of such inward investment and associated jobs, international trade in such products should be free from any prejudicial dumping or subsidised exports by Japan? As fork lift truck production is one of the areas that will be covered by the new survey agreed by the Commission, will my right hon. Friend give an assurance that there will be some finite time limit on the studies that will be undertaken to further substantiate and obtain evidence on the extent to which there is dumping in these products?

Mr. Pym: I cannot give my hon. Friend an assurance as to a precise time, but I agree very much with what he said. As he knows, Britain and other countries have taken much trouble to preserve the open trading system, which is threatened by the pressures for protectionism which are a natural concomitant of a deep world recession. That must be stopped and we will do everything we can to prevent it. We want that trade and we want free investment and inward investment into this country. I will certainly take up my hon. Friend's point about time.

Mr. Tam Dalyell: By an oversight the Foreign Secretary did not respond to the last question of my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) about loans by Lloyds and 20 other banks to Argentina. Is it right that the Bank of England and the Treasury have agreed to such loans? I am not necessarily critical, but if so, how can we be certain that part of the money is not used to finance that sinister cargo that left St. Nazaire, of longer-range Mirages and properly fused Exocets? How do we know that any bank loan is not used for armaments?
On a separate question, in his original statement the Foreign Secretary referred to the three scientists appointed


to examine the Super Sara project. Who are the three scientists, and what exactly are their terms of reference in this important matter?

Mr. Pym: On the first point, we did not discuss Argentina but we did discuss Poland and, in relation to that, the Polish debt. That is why I answered the hon. Member for Liverpool, Walton (Mr. Heffer) with regard to that part of his question and did not refer to Argentina. I cannot off the top of my head give the hon. Gentleman the names of the three scientists, but a number of us questioned the cost effectiveness of the project, which has to do with nuclear safety and is an important subject. It is being studied and researched in other countries as well as the EC. Before we continue with a commitment that would last a number of years we want to be entirely satisfied that the project is the right use of scarce resources. We will probably come to a final conclusion about the future of this programme in February.

Multi-fibre Arrangement

The Minister for Trade (Mr. Peter Rees): With permission, Mr. Speaker, I should like to repeat a statement made in another place by my right hon. and Noble Friend the Secretary of State about the multi-fibre arrangement.
The Council of Ministers yesterday agreed that the European Community should stay in the third multi-fibre arrangement for the whole of its term up to July 1986. This decision marked the end of almost two years of negotiations; first to decide upon a protocol to extend the MFA itself and, secondly, to settle with 26 individual supplying countries or territories the terms of new bilateral agreements to run up to the end of 1986.
Twenty-five new agreements have now been initialed and will come into effect on 1 January. The countries involved are Bangladesh, Brazil, Bulgaria, Colombia, Czechoslovakia, Egypt, Guatemala, Haiti, Hong Kong, Hungary, India, Indonesia, Macao, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Romania, Singapore, South Korea, Sri Lanka, Thailand and Uruguay. All these agreements were concluded within the negotiating mandate established by the Council of Ministers at a series of meetings during this year and 1981.
One country, Argentina, has not concluded a new agreement, and the European Community will therefore impose a unilateral limitation on Argentine textile imports. There will also be unilateral measures, as before, in respect of Taiwan.
The 25 agreements are technically complex and contain several hundred quotas. The most important points are, however, as follows.
First, the quotas. For the eight most sensitive textile and clothing products making up group I, the global ceilings established by the Council in February have been fully respected. The annual rate of growth in these quotas between 1983 and 1986 will be substantially below 1 per cent. per annum on average, for the United Kingdom share.
For the five group one clothing categories, the 1983 quotas of the three dominant suppliers who have so far concluded agreements—Hong Kong, Macao and South Korea—will be cut back by 7 to 8 per cent. on average from their 1982 levels. The corresponding quotas for Taiwan will for the time being be reduced by 10 per cent. Outside group one, annual growth rates will in the great majority of cases be significantly below the rates applying under MFA 2.
I turn to the textual provisions of the new agreements. The agreements follow the same general outline as the present agreements, but with a certain number of significant improvements. All the agreements contain tougher provisions than in the past for introducing new quotas—the "basket extractor mechanism"—and for dealing with fraudulent imports in breach of quotas. All the agreements contain the "anti-surge mechanism" which can be invoked when there are substantial surges of imports within quotas. For the dominant suppliers there are changes in the so-called "flexibility" provisions, which for group one products will allow us to withhold in large measure advance use of quotas or carry-over from the previous year.
Those are the main points. Following past practice, the new agreements, once they have been formally signed, will be submitted to the appropriate Committee of both Houses in the usual way. However, before the end of this month the Council regulations containing the quotas for 1983 will be published and available for detailed analysis.
The new agreements extend the protection of the United Kingdom textile and clothing industries against low-cost imports for a further four years, and at a rather tougher level than hitherto. I have every confidence that those industries which have played such a notable part in the industrial life of this country will take full advantage of the certainty offered to them by these agreements to secure and improve their position in home and export markets.

Mr. K. J. Woolmer: The House will know that the Opposition have consistently called for, and supported, a tough negotiating position in MFA 3. Although some important matters of concern remain, I congratulate the Minister on his grasp of the issues facing the textile and clothing industries and on his tenacity and stamina during the long negotiations.
However, the House will feel that today's statement was too brief and that it did not offer hon. Members or the workers and managements of those important industries any assessment of the impact of the new agreements on jobs and production. I remind the House that 210,000 clothing and textile jobs have been lost since June 1979. For the remaining 580,000 workers, it is vital to know whether the agreement means job stability and whether there is a basis for confidence in the future. Did the Minister satisfy himself about the consequences of the agreement for jobs and production before he agreed to the deals? If so, will he tell the House his assessment of those consequences up to 1986?
Will the agreements stop the rising import penetration in those industries? Does the Minister accept that the original mandate suffered from a fundamental weakness, by basing growth in future quotas on 1982 quotas, instead of on the exisiting levels of trade? Does the hon. and learned Gentleman accept that that crucial factor means that imports of the most sensitive products can grow by more than 20 per cent., which is far in excess of the less than 1 per cent. growth in quotas that he presented in his statements? Why did the hon. and learned Gentleman agree to a weakening of the cutback from dominant suppliers—on average from 10 per cent. to 7½ per cent.—and is he aware that Hong Kong has presented that as meaning no cutbacks in its exports to us?
Is there not a systematic and substantial uplift of quotas from 1982 to 1983 in many products? Will not that uplift in the next 12 months render worthless any claims to a lower rate of import growth in the subsequent three years?
Will the Minister be more specific about group two imports? Will he give us his estimation of the import growth that is to be permitted compared with the 5 per cent. growth under MFA 2? Why has the hon. and learned Gentleman referred to a growth in quotas between 1983 and 1986? What is happening to the growth in quotas in that uplift period?
Does the Minister recognise that his efforts to sustain the textile and clothing industries are being sabotaged by the Government's economic policies of deflation and an over-valued pound? The latest disastrous industrial output figures show that there has been a 28 per cent. fall in textile and clothing production since the Conservative Party came

into office. Will the hon. and learned Gentleman urge on the Prime Minister and her Ministers the need to change their policies as effectively as he appears to have dropped his free trading principles in the interests of British industry?

Mr. Rees: I am grateful to the hon. Gentleman for his opening remarks. However, I had thought that the House would welcome the brevity of my statement, as it is the third to be made this afternoon.
It is impossible to forecast with any scientific accuracy the precise consequences of the new agreements for jobs. The industry is going through a period of restructuring and has been for perhaps the past decade or more. As a result of the new agreements within the protocol, managers will have some certainty when plotting their courses.
The hon. Gentleman suggested that imports in sensitive quotas could grow by as much as 20 per cent. he is being wildly speculative. As I have said, and as I stress, the growth rates in group one—the sensitive group—will be only 1 per cent. per annum for the United Kingdom. That is far lower than the growth rates negotiated under MFA 2, which was worked out under the previous Labour Government.
As regards the weakening of cutbacks, I stress that when aggregated, the individual agreements are comfortably within the global ceilings that form such an important part of the negotiating mandate, which I explained to the House at an earlier stage in the negotiations. For group two imports, there are about 100 quotas and it is impossible to give any realistic growth rate figures for them. However, the figures overall are likely to be less than the growth rate for group two under the previous MFA.
The hon. Gentleman has been spreading gloom for too long about the effect of the Government's economic policies on the textile industry. I congratulate the industry on the fact that its exports are running at £2 billion per annum. One company is even exporting shirts to Hong Kong.

Mr. Robin Maxwell-Hyslop: Without a copy of my hon. and learned Friend's statement, it is difficult to follow the details, but what specific action has been taken to deal with the problem of textile exports from the United States of America to the European Community, and particularly to Britain? Normally, we do not consider the United States of America to have a low- wage economy, but that is the nature of the textile industry in Georgia. Those in that textile industry often work in appalling conditions that rival those in the Far East. Are not Malaysia and Hong Kong, for example, right in saying that we do not apply the same standards to the United States of America as we apply to our colonies or to members of the Commonwealth?

Mr. Rees: The United States of America is not covered by the MFA or by any of these specific agreements. Notwithstanding what my hon. Friend said, it is not regarded as a low-cost exporter. There have been considerable exports from the United States of America to the United Kingdom market, but they are now slightly in decline. Until recently, the United States of America had an advantage, because of its energy costs and the pound-dollar exchange rate. However, those advantages have been largely redressed. I hope that the United Kingdom's textile industry will be able more than to hold its own.

Several Hon. Members: rose—

Mr. Speaker: Order. If questions are brief, I shall be able to call all those who have been standing in their places, as I know that they have constituency interests.

Mr. Bob Cryer: Does the Minister accept that if there is a 1 per cent. growth rate in imports of group one products during a recession, it will inevitably lead to closures in Britain? How will the MFA be enforced, as enforcement is crucial to its success? Who will supervise the quotas activating the basket extractor mechanism? How speedy will remedial action be? Will action depend on Government-fed information or on the industry? The industry is not equipped to act, and that means that urgent Government action will be needed to put the MFA into operation. This is a complicated matter which the Minister accepts that he has not been able to detail. Can we have an early debate so that we can discuss the details?

Mr. Rees: I would not accept that a 1 per cent. growth rate in group one products must inevitably result in closures. With regard to enforcement, as the hon. Member for Keighley (Mr. Cryer) and the House will appreciate, exporting countries will have to give licensing authority for exports which will match the licensing from this country. The policy is a matter for my Department, but the supervision will be a matter for the Customs and Excise. I assure the hon. Member for Keighley that they will be as astute and quick as they have been in the past to detect any breach of ceilings, and any circumstances that might require the operation of the basket extractor mechanism. It is not a matter for me whether we have a debate.

Mr. Nicholas Winterton: May I congratulate my hon. and learned Friend on the tenacity and vigour with which he has pursued the MFA and endeavoured to achieve a satisfactory outcome. I believe it is unequalled by any Minister since the inception of the MFA.
Is my hon. and learned Friend aware that the growth rate that has been obtained is still higher than the expected growth of consumption, and that the total access to the United Kingdom market for clothing and textiles is much higher than recent actual trade levels? It is much higher than this country can assimilate. Is he further aware that the fundamental weakness of the mandate, upon which he has had to negotiate, is that the quotas set for 1983 are generally far too high and much higher than recent trade levels? Will my hon. and learned Friend direct his attention to those fundamental matters? We are dealing with an industry in which 300,000 people have lost their jobs during the past 5 years.

Mr. Rees: I am grateful to my hon. Friend the Member for Macclesfield (Mr. Winterton) for his kind words. They are a consolation to me, as they come from someone who has such expert and wide knowledge of the textile industry. My hon. Friend is taking too gloomy a view of growth rates. He will be aware that the anti-surge mechanism was devised largely at the United Kingdom's request to deal with a sudden surge of imports. I hope that that will meet the point raised by him. I am acutely aware of the number of jobs that have been lost over the past two or three years. I made that point with great regularity at the Council of Ministers which was called to consider these matters.

Dr. Shirley Summerskill: Will the Minister bear in mind that it is absolutely no comfort to the

thousands of textile workers in West Yorkshire, including those in my constituency, to be told that the industry is going through a period of restructuring? Will he answer the question put by my hon. Friend the Member for Batley and Morley (Mr. Woolmer) who wants an assurance, on behalf of those people employed in the textile industry and those who have lost their jobs, that as a result of these welcome protective measures there will be no further mill closures and jobs lost. The measures will be tested by the ability of people to stay in work in the future.

Mr. Rees: I recognise the anxiety of the hon. Member for Halifax (Dr. Summerskill). She and the House must realise that I could not possibly give such an assurance. However, I believe that both the textile and clothing industries can take some comfort from the new MFA. They have an assurance that there will not be a flood of imports from low-cost exporters and therefore they will be able to plan for the next four years with greater certainty than seemed possible even six months ago.

Mr. Michael Latham: Is my hon. and learned Friend aware that, while we must reserve judgment on the details, there will be a welcome from the Conservative Benches for his persistence and hard work on a difficult matter? Can he assure the House that when he was sitting next to his French colleague from the EC negotiating about the Third world he told him that we expect also to be able to sell knitwear and textiles to the French?

Mr. Rees: I believe that that general point became clear during my interventions. As my right hon. Friend the Foreign Secretary made clear in his statement preceding mine, we attach great importance to the opening of the European Community's internal market. Such barriers as remain must be removed steadily and relentlessly. I believe that the particular point that my hon. Friend the Member for Melton (Mr. Latham) has in mind will be the subject of challenge by the European Commission.

Mr. Barry Sheerman: The Minister will be aware that the Opposition are grateful for small mercies, but that we do not put all our eggs in the MFA basket. While the Opposition are grateful for the reasonably tough stand taken by the Government, we believe it is only the beginning of a process of resuscitating an industry killed by the Government's policies.
The Werner report states clearly that our competitors' Governments are trying to save them. Our Government are trying to destroy our home industry. Shall we now see the Government aiding wool textile industry areas which have just lost intermediate development status and have no hope of any other State aid?

Mr. Rees: I have never asserted to the House, and I do not believe that any responsible spokesman could, that the multi-fibre arrangement—whether it be first, second, third or any individual agreements—would solve all the problems of the textile industry. That would be largely a matter for the industry. There are other aspects of our market and export markets that will require constant attention and consideration. I realise that the third point by the hon. Member for Huddersfield, East (Mr. Sheerman) is a constituency point, but it is a matter for my right hon. Friend the Secretary of State for Industry, who will no doubt take careful note of what the hon. Member has to say.

Mr. John Lee: May I join other hon. Members in congratulating my hon. and learned Friend on all his efforts on behalf of the textile and clothing industry? May I draw his attention to the fact that one of the biggest criticisms of the existing MFA, which was indirectly negotiated by the Labour Government, relates to policing? Is my hon. and learned Friend satisfied that there are sufficient personnel in his Department and in the Customs and Excise to enforce and effectively police the new MFA?

Mr. Rees: I understand the anxiety felt by my hon. Friend. It echoes that felt by the Opposition. The agreements are worth nothing if they cannot be properly policed and enforced. Only a rash man would say that he was absolutely confident that there would be no breach of any agreement. I believe that all the necessary administrative arrangements have been made to ensure that there will be proper enforcement.
If any hon. Member receives evidence of breaches of the provisions of the agreement we will take them up urgently.

Mr. Barry Jones: The Minister has chastised hon. Members for expressing gloomy views. Has he forgotten that by September this year Great Britain had imported £1.5 billion worth of textiles? How ruthless will the Minister be against cheating imports? Does he know that in my constituency the Deeside Courtaulds mill is struggling desperately to remain open and needs him to take action against man-made fibre imports?

Mr. Rees: I recognise the deep anxiety felt by the hon. Member for Flint, East (Mr. Jones) about man-made fibres, which are of crucial importance in his constituency. Man-made fibres from low-cost exporters are covered equally by the multi-fibre arrangement and the various specific agreements. The fraud provisions in the multi-fibre arrangement have been tightened considerably compared with those in the previous multi-fibre arrangements.

Mr. Jack Straw: Does the Minister accept that the Government's record towards the textile industry must be judged as a whole? To do that it must be set against the fact that under the Labour Government the output of the textile industry remained stable throughout the five years and under this Government, as my hon. Friend the Member for Batley and Morley (Mr. Woolmer) said, it has slumped by 28 per cent. Employment in the textile industry in many of our constituencies has been halved. Blackburn has lost 3,000 jobs during the last three years. Despite all the Minister's hard work, the fundamental failure of the MFA is that there is no recession clause and import growth is not linked in any way to the continuing decline that the textile industry will face as a result of the Government's economic policies.
Does the Minister agree that he has said nothing about damaging imports from some of the Mediterranean associate countries, including Turkey, whose breach of the unilateral imposition upon them has been scandalous? What action do the Government intend to take to restrain Turkey and the other EC associates from breaching the spirit of the MFA?

Mr. Rees: I appreciate that the arrangements must be judged as a whole. The decline of the textile industry did not start three years ago. It had been going on for a much

longer period. It is precisely because of recessionary pressures that the Community pressed for, and secured, a cutback in the quotas of the three dominant suppliers and that the Community stood out for much lower growth rates than were secured by the previous Government through the Community under the second multi-fibre arrangement.
I did not refer to Turkey or the Mediterranean suppliers—I appreciate that this is an important aspect of the textile scene—because they are not dealt with technically under the multi-fibre arrangement. Voluntary restraint arrangements have been negotiated with most of them. My hon. Friend the Member fo Macclesfield (Mr. Winterton), who is so well informed, reminds me that no voluntary restraint arrangement has currently been negotiated with Turkey. An attempt was made this year. In regard to breaches by Turkey of earlier arrangements, the Community took action to safeguard category 2 and category 4 products. We shall be keen to see that Turkey plays fair with our textile market.

Mr. Tom McNally: May I ruin the Minister's afternoon completely by joining the hon. Member for Batley and Morley (Mr. Woolmer) and the hon. Member for Macclesfield (Mr. Winterton) in offering congratulations on the completion of complex and difficult negotiations? Does the hon. and learned Gentleman agree, given our Indonesian experience, that we have benefited from negotiating these arrangements as a Community? Will he also say that it is part of his policy—this is of great importance to the industry—now to move to MFA 4, which will provide a long-term, ordered and structured market both for the developing countries and for the British industry?
I wish also to take up the question posed by the hon. Member for Tiverton (Mr. Maxwell-Hyslop). Will the Minister take on board the threat to the British textile industry posed by developed textile manufacturers such as the United States who do not always play fair?

Mr. Rees: My gratitude to the hon. Gentleman for his opening remarks was tempered by his suggestion that we should already be enmeshed in negotiations for a fourth multi-fibre arrangement. We should see how matters turn out. We should not be committing ourselves to another prolonged and agonising negotiation when we have only just completed one. I agree with the hon. Gentleman about our position in the European Community and his reference to what occurred at an earlier stage when quotas were opened in respect of Indonesia.
We derived strength from negotiating in this instance through the Community. Our exporting industries would have been in an exposed position if we had been attempting to negotiate so toughly on our own without the support of other members of the European Community. We can derive considerable satisfaction from being part of the largest trading group in the world.
I do not think that I can add to what I have stated about imports from the United States. I hope that this w ill, to a degree, correct itself because of a readjustment in the exchange rate between the dollar and the pound, and also because of the increase in energy costs in the United States. It is certainly a matter that we shall keep under review.

Mr. Woolmer: Will the Minister recognise that the Government's own Central Statistical Office yesterday published figures showing that in the last three years of the


Labour Government production in textiles and clothing increased slightly, whereas in the first three years of his Government production fell by 25 per cent? How can he claim that to be a success or anything other than a cause for grave concern?
I wish to press the Minister on the issue of the uplift between 1982 and 1983. The hon. and learned Gentleman must give an answer to the House. Is he aware that although the figure quoted for the growth rate in the supply of anoraks from three ASEAN countries from 1983 to 1986 is 4½ per cent., the increase for the first 12 months is 24 per cent? Is that not shattering support for the truth of the claim that there will not be a restriction of imports and that a serious threat will arise to jobs? I implore the Minister to answer this question. Does the agreement mean job stability and prosperity for textiles and clothing? If he cannot give that assurance, why has he agreed to these bilaterals?

Mr. Rees: No Minister in his right mind would assure any industry of job stability and prosperity. These factors must, to a large degree, depend upon circumstances outside any Government's control. There is the world recession. Matters also depend to a considerable degree on the entrepreneurial skill of the managers in a particular industry. The hon. Gentleman knows that he makes a rather absurd proposition.
On the issue of uplift, the hon. Gentleman has carefully selected anoraks because they are in the less sensitive area of group 2. They have been generally accepted by the Community and by the industry not to be as sensitive as the areas covered by group 1. A fair comparison would be the sensitive areas of group 1 where such extreme examples could not be reproduced.

Mr. Dennis Skinner: On a point of order, Mr. Speaker. I wonder whether you will inquire if the necessary requirement for the advertising of this statement to be posted around the House has been carried out? Neither the Gang of Four nor any Liberal Members have turned out to hear the statement. I wonder whether the proper posters have been arranged.

Mr. Cryer: On a point of order. I have raised this point of order with you, Mr. Speaker, on several occasions. It was clear when the Minister rose to make his announcement that a great bundle of copies was available in the Press Gallery. Yet, repeatedly, statements are not made available to hon. Members. The multi-fibre arrangement is a particularly complex matter. I know that

it is difficult for you, Mr. Speaker, but I would ask you to try to use your influence to see that copies are available for hon. Members so that we can at least be placed on the same basis as members of the press.

Mr. Speaker: I have a great deal of sympathy with the point raised by the hon. Gentleman. It is, however, a matter for the usual channels, not for me.

Mr. Arthur Lewis: Further to the point of order, Mr. Speaker. This matter may be within the prerogative of the usual channels. Is it not the case, however, that you, Mr. Speaker, in conjunction with the Leader of the House, have duties to try to help the House? This, you and the Leader of the House do. As the Leader of the House is now present and as you, Mr. Speaker, have said that you have sympathy with the point put by my hon. Friend the Member for Keighley (Mr. Cryer), may I ask you to ask the Leader of the House—since he provides copies to hon. Members on the Liberal Bench who never turn up—that some copies might at least be available to hon. Members from the Vote Office? If one copy is to be made, it might be possible for another 10 or 20 to be available in the Vote Office. I see no reason why the Leader of the House could not advise all Ministers that copies of statements should be made available in the Vote Office.

Mr. Nicholas Winterton: Further to the point of order, Mr. Speaker—

Mr. Speaker: I shall take the point of order, but the applications under Standing Order No. 9 are a little later than usual.

Mr. Winterton: I shall be brief, Mr. Speaker. Further to that point of order, and in support of what has been said, is it not fair, as you are here to safeguard the position of Back Benchers, that those of us who have an interest in an extremely complicated matter such as the MFA should be allowed to have a copy of the statement before it is made? If the press is allowed to have it, and 167 copies can be made available for the members of the Press Gallery, cannot the Government make available to Back Benchers copies of such a complicated and important statement before the Minister makes it?

Mr. Speaker: Order. I point out to both the hon. Member for Macclesfield (Mr. Winterton) and the hon. Member for Newham, North-West (Mr. Lewis) that those who are responsible for these matters will have listened, I presume, as carefully as I have to the points of order. However, I have put my foot in it once this afternoon and I have no desire to do so a second time.

Weir Group Plant, Alloa

Mr. Martin J. O'Neill: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
the occupation of the main block of the pumps division of the Weir Group plant in Alloa, following the management's withdrawal of 300 staff employees from the payroll.
This sit-in started last Tuesday, 7 December, and is the first occupation of a plant by working people in Scotland since the Employment Act 1982 attempted to make such forms of protest illegal, and follows the victory of the Plessey workers in the courts earlier this year.
It is imperative that the Scottish Office Minister concerned with employment be brought to the House and given time to comment on the issue. Furthermore, the management's action in removing 300 staff from the payroll when they were not involved in the dispute must require comment from a Minister, because trade unionists who are not directly involved in the dispute should not be punished in this way.
This is a matter of great importance, not only to my constituency but to all working people whose rights at work could be placed in jeopardy by unscrupulous management behaving in the way that I have described.

Mr. Speaker: The hon. Member for Clackmannan and East Stirlingshire (Mr. O'Neill) gave me notice before midday that he would seek leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
the occupation of the main block of the pumps division of the Weir Group plant in Alloa, following the management's withdrawal of 300 staff employees from the payroll.
The House listened carefully to what the hon. Member had to say, because we realise its importance and significance. However, the House has instructed me to take into account the several factors set out in the order, but to give no reason for my decision. I listened carefully and sympathetically to the hon. Gentleman, but I must rule that his submission does not fall within the provisions of the order and therefore I cannot submit his application to the House.

NATO Council (Ministerial Meeting)

Mr. Denis Healey: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
the recent ministerial meeting of the NATO Council.
No one can deny that the meeting was specific—it took place last week and has been the subject of widespread comment and controversy all over the world ever since. No one can deny that it was important—it dealt with matters of life and death in the most literal sense. However, all these vital issues were left by the meeting in a state of complete confusion that can be cleared up only by a debate in the House.
First, there was the furtive, shifty and muddled handling of the planned move of the American headquarters from Germany to Britain. I choose my adjectives carefully, out of deference to parliamentary procedure, but the way that this was handled by all Governments, including our own, created maximum concern and suspicion throughout the Alliance. The move was first denied, then admitted as a contingency plan in case of war, and now appears to be planned to take place in time of peace. We now know that the British, German and American Governments knew about the plan months ago, although they denied all knowledge of it when the plan was first leaked to the press on Friday.
Even more important, the meeting left us all in complete confusion about a problem that is directly relevant to the survival of all hon. Members of the House and all the men and women we represent. I refer to the concern that there should be agreement on theatre nuclear forces between the Soviet Government and Western Governments in time to make unnecessary the deployment of Cruise and Pershing missiles at the end of next year.
The depth of anxiety on this matter becomes even more evident as the weeks pass, not only in Britain, in Greenham Common and Hyde Park, but in West
Germany, Holland, and every country where it is proposed to place the missiles. The Foreign Secretary's press briefing as reported in The Guardian on Friday was to the effect that the general feeling was that the Soviet attitude on this matter had started to harden in the past few weeks.
Thanks to press leaks in an American newspaper, we now know that the Soviet Government made a new offer in the past few weeks, as far as I know after Mr. Andropov succeeded Mr. Brezhnev as leader of the Soviet Government. This offer included a cut of 50 per cent. or more in the number of SS20 missiles targeted against Western Europe. Many hon. Members and many people outside, in the United States and all over Europe believe that this offer gives us an opportunity that may not recur unless it is immediately seized. I do not wish to discuss the offer in detail, but I should like more detail of it from the Foreign Secretary if you will accede to the the request I am making, Mr. Speaker.
It has been reported that President Reagan has rejected the Soviet offer out of hand, while the Danish Prime Minister in the White House yesterday said that he thought that it deserved consideration. The Foreign Office briefing


yesterday, which was widely published in today's newspapers, says that we need clarification across the negotiating table.
It is difficult to overestimate the importance of this matter. We believe that the Soviet offer gives us an opportunity of taking a decisive step towards peace, an opportunity that may not recur if it is not seized now. We also believe that if the agreement can be reached by negotiation it will mark a decisive step towards the type of nuclear arms freeze that was overwhelmingly approved by the United Nations General Assembly yesterday and that is gaining wild-fire support both here and in the United States. We also believe that the offer would strengthen Western security by reducing the number of Soviet long-range nuclear forces close to the level of Western long-range nuclear forces.
Finally, discussion of this matter is urgent because talks between the United States and the Soviet Union on arms control in Europe will resume on 27 January 1983, only a few days after our Parliament reassembles. However, discussion among the allies on this matter to settle the American negotiating position must start taking place now. There is no opportunity for us to influence the ultimatum position before then.
We know that American officials are divided on the matter. Mr. Paul Nitze, the leading American negotiator, whom I know well, and who is the most cynical, hardheaded and experienced of all American negotiators on this subject, is said to want to pursue the proposal. Unless the British Parliament can express its view immediately on the matter, we may lose the opportunity of exerting any decisive influence on the United States.
The Foreign Secretary, in a press conference in Brussels on Friday, said that it was his intention that the British House of Commons should not be allowed to consider the question of the deployment of cruise and Pershing missiles before, or indeed after, the British Government took that decision.
When the NATO Governments took that decision at the end of 1979 to pursue simultaneously the preparation of a possible deployment and negotiations with the Soviet Union, they assumed the ratification of the SALT II treaty. It has not been ratified. Recently President Reagan made proposals which, if carried out, would violate not only the SALT II treaty but the SALT I treaty. Moreover, any decision on deployment was held to depend at that time on an honest attempt by the Western powers to negotiate an agreement on arms control, which would make this unneccessary.
It is my view—and I believe that I have the support of my right hon. and hon. Friends—that it is essential that the House of Commons should have an opportunity to clarify what happened at the NATO Council, to clarify the position of the Western Alliance on this matter, and to do so immediately, because unless we take the opportunity now it may not recur, and we shall all carry a heavy responsibility for the fate of our descendants.

Mr. Speaker: The right hon. Member for Leeds, East (Mr. Healey) asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,

the recent ministerial meeting of the NATO Council".
May I say to the House first that, in reaching my decision on his application, I am not at all influenced by the supposed statement of the Secretary of State for Foreign and Commonwealth Affairs. I do not believe that that has as much bearing on the question as other matters have. I am satisfied that the matter raised by the right hon. Gentleman is proper to be discussed under Standing Order No. 9. Has the right hon. Gentleman the leave of the House?

The pleasure of the House having been signified, the motion stood over under Standing Order No. 9 (Adjournment on specific and important matter that should have urgent consideration) until the commencement of public business tomorrow.

Mr. Patrick Cormack: On a point of order, Mr. Speaker. I heard every word uttered by the right hon. Member for Leeds, East (Mr. Healey), either from the Bar of the House or from my seat, and I seek your clarification on one matter. I do not seek to dispute your decision, which I believe is the right one, but it seems to me that the right hon. Gentleman rather abused the tradition of the House through the length of his speech. I repeat that I heard every word that the right hon. Gentleman said, and it seemed to me that he advanced the arguments and did not merely ask for a debate—[Interruption.]

Mr. Speaker: Order. Many of the questions and statements have seemed very long to me this afternoon. Therefore, we had better let that point of order be lost for the time being. The debate will take place tomorrow.

Mr. James Wellbeloved: On a point of order, Mr. Speaker. I think that the House will be indebted to you for your ruling on the motion of the right hon. Member for Leeds, East (Mr. Healey). I should like to ask whether you would take what has happened today as a welcome precedent in the relaxation of the stringent rules which heretofore have applied in relation to such applications. It is for the benefit of the House that an hon. Member should be able to put a concise application under Standing Order No. 9, as the right hon. Member did, and I hope that we may all take it as a welcome precedent for the future.

Mr. Speaker: Order. That point of order was as helpful as all the hon. Gentleman's points of order.

Statutory Instruments, &c.

Mr. Speaker: By leave of the House, I shall put together the three motions relating to statutory instruments.

Ordered,
That the draft Employment Protection (Variation of Limits) (No. 2) Order 1982 be referred to a Standing Committee on Statutory Instruments, &amp;c.
That the Fishing Vessels (Temporary Financial Assistance) Scheme 1982 be referred to a Standing Committee on Statutory Instruments, &amp;c.
That the draft Monopolies and Mergers Commission (Membership of Groups for Newspaper Merger References) Order 1982 be referred to a Standing Committee on Statutory Instruments, &amp;c.—[Mr. Thompson.]

Medical Drugs (Manufacturers' Liability)

Mr. Jack Ashley: I beg to move,
That leave be given to bring in a Bill to provide for the imposition of strict liability for compensation on the manufacturers of medical drugs.
Millions of people have been helped by medical drugs which rank among the wonders of this modern age. They are extremely complex and remarkably potent, and they have cured illnesses and saved life on a massive scale. However, there is a minority who have been gravely damaged by drugs. They are the victims—usually the unwitting victims—of a drug mishap, and they are in great need.
At present, compensation will be given only to those people not only if they can prove that they were damaged by the drug, but if they can also prove negligence by the manufacturer. As the family of thalidomide victims found to their great anguish, this can lead to years of struggle and litigation. Negligence is virtually impossible to prove, because it requires highly specialist knowledge of drug testing and preparation, and knowledge of the internal operations of a drug company—something that no ordinary individual can obtain. Most people soon give up, because the fight is an unequal and unfair one. So the law, which in theory is neutral, favours the drug companies in practice, and is therefore unjust to injured individuals.
My proposed Bill seeks to redress the balance by imposing strict liability on the companies for damage caused by their drugs. It would remove the requirement for a drug-damaged victim to prove negligence. So long as a person could prove that the drug caused the damage, compensation would follow.
I recognise that drugs are a unique product, insofar as risk and effectiveness are often inextricably linked. So it is important to be precise about the circumstances in which stricter liability would apply. This Bill would not provide compensation for every headache and tummy upset caused by drugs. Most drugs, even the ordinary aspirin, can have minor side effects, and it would be unreasonable to impose liability for every one.
The circumstances in which I believe that there should be strict liability are those recommended by the Law Commission. In other words, the drug should comply with a standard of reasonable safety that a person is entitled to expect, and the standard of safety should be determined objectively, having regard to all the circumstances in which the product is put into circulation, including, in particular, any instruction or warnings that accompany it.
Sometimes the risks which are known to the drug companies are not emphasised, and this Bill would encourage them to make sure that risks are clearly, accurately and prominently displayed.
The Bill would apply to those cases where there were inadequate warnings of risks. It would also apply when the incidence or severity of drug damage was unreasonably high or unforeseen. The companies would not be allowed

a defence that their drugs were not defective in the light of scientific knowledge when they were developed. To permit that defence would create so large a loophole in the compensation cover as to allow victims of another thalidomide disaster to slip through.
When there is drug damage, there is a clear choice between either allowing the damaged person to suffer without financial help or imposing an obligation on the drug company to pay on the basis of strict liability. The companies should accept responsibility because they are the only people able to control the quality and safety of the product and who are best able to ensure against claims. That is not only my view, but the view of the careful, cautious and conservative Law Commission which recommended the strict liability of the pharmaceutical industry, as did the Pearson Royal Commission and as, for that matter, did the European Commission.
Of course, some drug companies will not welcome this proposal, although the wiser ones will. They will know that the whole drug industry is being tainted by the hostile response of some companies to people damaged by their products. The public is becoming very worried about what appears to be a series of drug disasters. Those drug companies opposed to the Bill will claim that future research will be affected by the cost if strict liability is imposed. That is nonsense, and they know it. There is already strict liability in such European countries as Germany and Sweden, and also in the USA. There is no evidence whatever that research has been affected in those countries. In addition, the drug companies constantly assure us that the risks are slight, so that the costs are unlikely to be high.
When the Pearson Royal Commission reported I was not in favour of creating special categories because I hoped for a comprehensive no-fault compensation scheme. I have now changed my mind because, although I still hope for that, I recognise that that will not be instituted in the short term. In the meantime, we must accept the present compensation framework. However, that is no reason for not making progress within it. It is now time to make provision for those damaged by medical drugs, and an effective means of doing so is to impose strict liability on the manufacturers.
Before I sit down, I must register the strongest possible objection to the absence of any Minister from the Department of Health and Social Security while I present this important Bill which affects the many people who are damaged by drugs. The behaviour of the Department of Health and Social Security is scandalous.
Question put and agreed to.
Bill ordered to be brought in by Mr. Jack Ashley, Mr. Andrew F. Bennett, Mr. Tom Benyon, Mr. Ioan Evans, Mr. William Hamilton, Mr. John Hannam, Mr. Laurie Pavitt, Mr. David Stoddart and Mr. Dafydd Wigley.

MEDICAL DRUGS (MANUFACTURERS' LIABILITY)

Mr. Jack Ashley accordingly presented a Bill to provide for the imposition of strict liability for compensation on the manufacturers of medical drugs: And the same was read the First time; and ordered to be read a Second time upon 4 February and to be printed. [Bill 45.]

Rate Support Grant

The Secretary of State for the Environment (Mr. Michael Heseltine): I beg to move,
That the Rate Support Grant Supplementary Report (England) (No. 2) 1982, a copy of which was laid before this House on 28th July, in the last Session of Parliament, be approved.
This measure is supplementary to the Rate Support Grant Report (England) 1980. Its purpose is straightforward. It proposes selective grant reductions for authorities that failed to achieve the current expenditure reductions for which we asked in 1981–82. Reducing spending on day-to-day consumption has been a central principle on which much of our policy towards local government over the past three and a half years has rested. It is a principle that the Labour Government were forced to accept only under the overwhelming pressures of external forces. Presumably the memory of it is so bitter that so few Labour Members have come today to join the lonely crusade of the right hon. Member for Manchester, Ardwick (Mr. Kaufman) who apparently has alone thought fit to protest against this eminently reasonable policy that the Government are now proposing.
From May 1979 there should have been no possibility of any misunderstanding of our objectives. Indeed, it is not unreasonable to say that there was no misunderstanding about our objectives because by and large Labour Members appear to be fully satisfied with what the Government have done and obviously wish the report well. The paramount need was to stop, and then to shift on to a downward trend, the previously ever-increasing levels of current spending in the public sector. The House will be aware from its memories of the results of the Labour Government that failure to do that would only have prolonged the savage reductions in the capital programmes of local government that the Labour Government used to finance the rising staff bills under current consumption.
In the six years since 1974–75 authorities' capital expenditure has been halved while they have maintained excessive levels of manning and pay. In reducing current spending, we wanted to act in co-operation with local government. That was very much the basis on which we started and, indeed, we were assured by local government representatives that we would have that co-operation. It was only when those assurances proved to be worthless that we adopted the selective policies that are the subject of this debate. It was essential to develop effective incentives for the high-spending authorities to make the necessary reductions and to exempt historically low-spending authorities and those who met our targets from the consequences of overspending by the less responsible authorities.
Certain facts must be borne in mind and bear repeating as we once again return to this subject. I have no doubt that in the debate we shall hear again special pleading about the impact of so-called savage cuts on services. The truth, of course, is quite different. An objective analysis of the consequences that have flowed from the past few years now shows the validity of what we are trying to do. On any reasonable analysis the cuts that we have sought in current spending could have been secured by sensible management, put in hand sooner rather than later. Indeed, the majority of authorities have proved the reasonableness of our requests by achieving cuts on the lines that we have

oulined. However, sensible management and prudent use of resources was not the course adopted by some authorities. Some of them were quite prepared to accept Government targets as long as they were increased year after year. As soon as the Government asserted the right to set the guidelines in a downward direction, there was no longer a willingness on the part of some authorities to co-operate.
For 1980–81 I asked for a reduction of 2 per cent. from the outturn of two years before, 1978–79. For the next year, 1981–82, the year that is the subject of the report before the House, I asked for cumulative cuts for England of 5·6 per cent. That includes the 2 per cent. of the previous year. There is therefore no question of any authority being justified in complaining that there has been insufficient notice.
For 1981–82 the individual targets were given to every local authority in January 1981, but the broad trend of reductions had been made clear in the summer of 1979, so no one can argue that he did not know broadly what the Government had in mind. No one can argue that he did not have the time in which to make the dispositions and take the decisions that would have enabled him to move in the direction that we indicated.
Competent planning, especially planning of recruitment, in the preceding 18 months, would have enabled all the authorities that wanted to hit the targets to succeed in doing so or to make substantial progress in that direction. However, even a start made in January 1981, before the year to which we are referring began, would have enabled most, if not all, authorities to get very close. Not only would we have achieved the results but we would have done so without resorting to the much more intricate and detailed procedures that followed. We would have continued to achieve those results against the background of voluntary co-operation that had characterised the relationship between local authorities and the Government until then.
I have no doubt that the Opposition will continue their campaign of seeking to misrepresent the effects of making expenditure reductions in 1981–82. One cannot pick out any one year and point to the effects of expenditure reductions for that year unless one takes that year in the context of other years preceding it, so that one can see precisely the level that expenditure had reached.
The simple fact is that in 1979–80 local authorities spent more in real terms on current consumption than in any previous year in their history. They employed 3 million people, which was more than ever before—it was over 11·2 per cent. of the nation's labour force. We started our quest for economy, efficiency and value for money from a base position at a historically high level. There was massive potential for spending reductions. The reductions that I asked for averaged less than 2 per cent. for a single year. After all, in the life of the Labour Administration, local government increased its current expenditure by 6½ per cent. in real terms.
In one year the Labour Government were forced by the International Monetary Fund to face reality. Their response when faced with local government not delivering the aggregate expenditure reductions that were asked of it, was to make an across the board reduction in the total grant. The House will remember 1976. I think that I am right in saying that Labour Ministers had no hesitation in taking substantial action to secure reductions in local


authority current expenditure. They were prepared to do so by withdrawing indiscriminately and across the board grant that then reverted to the central Exchequer.
Because of the legislation that we inherited, we had no option but to follow that example when in 1980–81 local government in general did not meet the aggregate target. Therefore, in our first year the precedents for reductions in local authority current expenditure, set by the right hon. Member for Stepney and Poplar (Mr. Shore) and the Labour Party, were followed by us. They can criticise us, but only with the hypocrisy of Opposition Members who are trying to pretend that life is different on the Opposition Benches.
We reduced grant across the board by £200 million in that year. I said at the time that that hit those authorities that had made the economies, including those that had long started the process of reducing spending, but were already spending at comparatively low levels. Therefore, the system was unfair because there was no attempt to recognise the economy that has been practised in an authority. Consequently, it was the Government's intention, which was made clear before the election, to produce a more sophisticated and equitable system. Our aim was to see that grant was held back from high-spending authorities that consciously chose not to meet their expenditure targets.
In June 1981 budget returns showed overspending during 1981 to be £800 million. We still did not act, even faced with that substantial projected overspend, without full and fair advance warning of what we had in mind.
First we gave local authorities a chance to revise their budgets. We made it clear that grant would be reduced selectively for authorities that were not making the necessary reductions to meet their targets. Furthermore, we had explained to local authorities six months previously that authorities hitting targets could expect to be exempted from the effects of any grant reductions. The grant reductions proposed in the report apply only to high-spending authorities that ignored that advice and our requests for restraint. There can, therefore, be no justification for the argument that the measures in the report are retrospective. The notice was more than adequate. The intention was crystal clear. The implications of refusing to co-operate in a national policy objective were apparent to every local authority.
It is clear that when the proposals were published in detail in June 1981 certain authorities—of course, principally Labour-controlled—chose to ignore them. Some chose to increase their budgets. The councillors took those decisions in the full knowledge of the consequences. It was their choice to put the full burden on their ratepayers. In too many cases that meant levying substantial supplementary rates.
As a result the Government were left to hold back grant on a selective basis, as they said they would. There can be no case for the continued full support of the taxpayer for the lack of co-operation and in some cases for the profligacy or incompetence of authorities that choose to ignore the policies that have been set by the Government. Again, however, it is important to put in perspective the claims about swingeing reductions to which the grant abatement led in individual authorities.

Mr. John Heddle: Does my right hon. Friend agree that before May this year Birmingham city council fell within the category of the

profligate local authority that he has described, but since the change of political control in the city it has concentrated on finding economies within its present budget? Will my right hon. Friend endorse the decision of the city's refuse collectors, under threat of having refuse collections put out to private contractors, to find savings of £3·3 million, which is a 40 per cent. saving, so that not one extra penny will be provided by the rate support grant?

Mr. Heseltine: My hon. Friend provides only the latest, and perhaps one of the more dramatic, of the common examples of how economies can be achieved without reduction in service simply because the authority is properly managed and the costs are properly scrutinised. The tragedy implicit in my hon. Friend's intervention, which I much welcome, is that if the same rigour had been applied across the country by local government looking at service after service, by now we would already have achieved the economies sought by the Government and more resources would be available to pursue policies that would commend themselves to all hon. Members on a wide basis. I support the welcome initiatives that my colleagues in the Conservative Party have taken in Birmingham, since they gained control of that authority.
I was going to set the amount of reduction that we sought by way of grant abatement in the context of the overall scale of local authority spending. The total reduction is £201 million, which is spread over 107 authorities. That is on a total aggregate Exchequer grant for 1981–82 of more than £11,000 million. We are therefore discussing rather less than 2 per cent. Those authorities that meet their expenditure targets are fully protected from holdback. We have also recognised the circumstances of those authorities that have tried—but have perhaps not quite achieved it—to reach the targets that we set. For those authorities that come close and spend between 2 and 4 per cent. above their target, the full grant abatement scheme is reduced by 40 per cent. For those authorities that spend less than 2 per cent. above the target—those that get even closer—the abatement is reduced by 75 per cent. Those authorities that spend 4 per cent. or more above the target receive no protection at all.
I hope that the House will accept that not only have we given adequate and reasonable warning but, even when authorities have not fully achieved their targets but have tried and begun to do so, we have abated the penalty to recognise that they are going in the direction that the Government want.
We have also tried to protect low-spending authorities. Authorities that spend below the grant-related expenditure are generally among the lower spending ones. Their lower base line meant that the 5·6 per cent. reduction was relatively more difficult to achieve. We provided full protection from holdback for those authorities.
We listened to representations that were made; we recognised that cases for other aspects where we could help were pleaded and that we could accept them. There were two other forms of expenditure that we disregarded when deciding the level of holdback. We decided not to count increases in inner city expenditure by those authorities with the worst urban problems—those local authorities in the partnership or programme categories. Nor did we count inescapable costs that some local authorities had to cope with when dealing with the civil


disturbances in the summer of 1981. Once we have the information, we shall not count the extra costs of dealing with the problems of the 1981–82 winter.
In those ways we made every conceivable effort to aid those authorities that were trying. We also made every conceivable effort to make special provision for those authorities that faced difficult and inescapable problems.
It is illuminating to go through the list of those already high-spending authorities which, notwithstanding the options that are open to them, spent more and therefore lose grant.

Mr. W. Benyon: My right hon. Friend is saying that expenditure on inner city redevelopment is disregarded. Does he agree that there is a case to be made for new towns, that are taking a large part of the population from those areas and therefore face considerable extra expenditure, also having some such disregard?

Mr. Heseltine: My hon. Friend is on to an important point. One of the exemptions that we made was for local authorities below GRE. My hon. Friend will recognise that a significant number of the authorities that he might have in mind would have achieved exemption in that category. I do not wish to anticipate what I hope to announce soon but we cannot automatically assume that all such authorities at the lower end of expenditure are outside the general quest for economy and efficiency. With regard to the point that my hon. Friend the Member for Lichfield and Tamworth (Mr. Heddle) made, Birmingham is a classic example of the new opportunities in local government that are emerging every day in areas that might have been considered as having been scrutinised effectively but which obviously have not been.
More than 60 local authorities chose to exceed their spending targets by 4 per cent. or more and also did not qualify for a GRE exemption, and another 40 fell within the group that spent less than 4 per cent. above the target. The devastating consequence of the attitudes of councillors who take the decisions is best illustrated by examining the impact on those who must foot the bill—the ratepayers. I hope that the figures are the cause of equal concern to the Opposition who face the substantial unemployment levels that flow directly from those decisions.
In South Yorkshire, the council spent 17¾ per cent. more in 1981–82 than the target. That means that there was an increase in its cash current spending of nearly one fifth over the previous year. For the average ratepayer in the county, the rate bill increased by about 29 per cent. In the West Midlands, the target was exceeded by nearly 30 per cent. That means that current spending over the previous year increased by nearly one third. For the average ratepayer in the West Midlands, the effect was a 30 per cent. increase in the rate bill. The pattern was much the same in West Yorkshire, which overspent by nearly 25 per cent. Expenditure increased by nearly one third over the previous year and the ratepayers' bill increased by more than 25 per cent.

Mr. John H. Osborn: My right hon. Friend mentioned South Yorkshire as one of the offending counties. Would he direct his attention to the city of Sheffield? Is he aware that business people in Sheffield cannot go on? Their houses are too heavily rated

and their businesses are in such a condition that they cannot go on. What direct representations has my right hon. Friend had from them, bearing in mind the fact that I have recently referred many cases to him?

Mr. Heseltine: I am most grateful to my hon. Friend. It is one of the curiosities of life that I happen to have the figures for Sheffield with me. It is a metropolitan district rather than a county and the figures I have strongly suggest the trend about which I have been talking. Its expenditure in 1981–82 was 20 per cent. higher than the year before and the rates increased by 36·6 per cent. That is a classic example of what happens when authorities decide that extra expenditure should be pursued, regardless of the Government's policies and the economic recession, and disregard the consequent effect upon the levels of unemployment and the burden that is placed on their industrial, commercial and domestic ratepayers. I do not know where else one should turn for a more graphic example of the consequences.
Sheffield was not alone. In Sandwell, a 10 per cent. overspend on the target was accompanied by a 32 per cent. rate increase. In Walsall, the ratepayers had to find 30 per cent. more in 1981–82. The ratepayers of Wolverhampton got off relatively lightly—rates increased by only 21½ per cent.

Mr. Harry Greenway: Will my right hon. Friend deal with the increases in London?

Mr. Heseltine: It just so happens that I have some examples of what happened in London. Ratepayers in the 10 Labour-controlled boroughs in London suffered the most. The record, if "record" be the right word, is held by Brent which increased the rates by nearly 55 per cent. The ratepayers of Newham, Hounslow and Lewisham had to find 40 per cent. more than the year before. It must come as something of a surprise that Lambeth was in there with only a 16 per cent increase.
It is for those authorities and those increases and the policies that lie behind them that the Opposition are trying to enlist support. I was about to say "support of the House" but that would be a gross exaggeration, as sympathy for the Opposition is conspicuously absent on any scale. I can only assume that they have got wind of the horrendous record of Labour Party rate increases that I was about to read to the House, have reckoned that discretion is the better part of valour, and have absented themselves from supporting the right hon. Member for Ardwick and his dwindling band of Front Bench colleagues. They know that there is not much of a case for him to plead and that it is so embarrassing that they will not listen to it.
Perhaps I may help. I have a few more minutes to go. Perhaps the right hon. Member for Ardwick can whip up support in the Corridors of the Palace of Westminster. Meanwhile, I shall keep the show on the road. That will give him time to muster something by way of vocal support for when he repeats the misleading misrepresentations that we are used to.

Mr. Stephen Ross: I am sure that the right hon. Gentleman would like to pay tribute to the Liberal-controlled Isle of Wight county council and the Liberal-controlled Medina borough council, which did a Birmingham before Birmingham did it. It reduced the number of its waste disposal vehicles from 13 to eight, reduced the number of operatives and kept the service


within the council. Perhaps the right hon. Gentleman would like to say what those councils' rate increases were. He will know that they were much in keeping with local government increases in the South.

Mr. Heseltine: I am interested that the hon. Gentleman should be so lacking in information about his own authority. As he is leader of the authority, he should not need to ask my advice about the policies that he puts to it. Nevertheless, if it will help to refresh the hon. Gentleman's memory, my right hon. Friend the Minister for Local Government and Environmental Services, in replying to the debate, will make good the lapse in the usual standards that we expect from the hon. Gentleman. We shall ask those who keep a close record of these things to investigate the hon. Gentleman's authority so that we can provide him with the brief that is obviously not available to him now.
Doubtless the right hon. Member for Ardwick will be back with the usual scare stories about the facilities that have had to close down and with the claims that so often appear in the headlines in advance of the event, which are so rarely justified in retrospect because no one goes back to see what happened as a result of the policies as opposed to reporting their effect in advance.
The figures illustrate the true reality in all the authorities that have lost grant. Two thirds of the authorities that were subject to full holdback made real increases in their expenditure instead of reducing it. It cannot be argued that they have tried to be tight with their expenditure patterns when they were actually increasing them. Over 30 authorities increased their real expenditure by up to 10 per cent. and another 10 authorities increased their real expenditure by more than 10 per cent.

Mr. Tony Durant: Is my right hon. Friend aware that the hon. Member for Isle of Wight (Mr. Ross), who praises the Liberal cause in his area, has omitted to draw the attention of the House to the actions of the Liberal group on the Berkshire county council, which forced a 27½ per cent. rate increase on my electors against the advice of the Conservative group? However, the Liberals put the increase through. We were saddled with a 27½ per cent. increase because of the action of the Liberals.

Mr. Heseltine: The experience in Berkshire is characteristic of the Liberals wherever they have a decisive influence in local government. I cannot say that they manage to exceed the record rate levels that have been established by the Labour Party but they do their best to make a passable imitation of them in significant areas. They conspicuously seek to resist lower rate levels that Conservative groups try to introduce in areas where there is a three-party influence.
I have illustrated the devastating and deliberate effect of the refusal by Labour-controlled councils to respond to Government policies. They have acted as if money is not in short supply. They were willing to spend it on manpower and services. The only place where money is in short supply is in the bank accounts of the poor ratepayers, who have to finance the ever-rising level of expenditure.
There is no doubt that if the local authorities had intended to meet their expenditure targets they could have said so in the budget returns that they made in the autumn of 1981. It has been suggested that it would be proper to

base the detail of holdback on new and more up-to-date outturn data. I accept that where authorities have an outturn figure in 1981–82 which is lower than their revised budget submission, and they have therefore improved their position, they should be entitled to the benefits. I assure the House that we shall introduce a further supplementary report to ensure that this happens as soon as full outturn data are available. This will be in the normal way in which these matters are dealt with by supplementary reports from time to time.
Since 1981–82 we have kept up the pressure. I am in no doubt that the policy that we have adopted on targets and grant holdback is becoming increasingly effective. Since taking office we have started to reverse the growth in local government current expenditure. The majority of local authorities have made considerable efforts to meet their targets. The House may not be fully aware that the manpower levels of local government are now back to those of 1974–75. We have nearly eliminated all the growth that followed the reorganisation of local government. The benefit at the end of the day goes to the ratepayer and taxpayer. Those ratepayers include commercial and industrial ratepayers. The Labour Party is prepared to see them cut their productive work force to finance the staff bills of local government.
The lessons learnt during 1981–82 and 1982–83 will be reflected in the proposals for next year, which I shall announce on Thursday. The clarity of the underlying message remains. The setting of individual targets backed by a rigorous grant regime is a necessary and increasingly successful part of our policies to reduce local government current expenditure, and we shall continue to consolidate the gains that we have made.

Mr. Gerald Kaufman: Any hon. Member who had had no previous experience of the Secretary of State for the Environment might wonder, after listening to him today, why anyone should make a fuss about the rate support grant supplementary report which he is asking the House to approve. The report will remove £201 million in rate support grant penalty from 104 local authorities. The right hon. Gentleman referred to 107 authorities, but he was including Camden, Crawley and the City of London, none of which will receive any rate support grant for the year and from which even he is incapable, therefore, of removing any further grant.
The right hon. Gentleman made it all sound so simple and straightforward. In his holdback exercise during the summer of last year he gave a warning to local authorities that they must cut their budgets for the financial year 1981–82 to 5·6 per cent. below their 1978–79 expenditure and that they would be penalised if they did not do so. In his version of what then took place, some local authorities obeyed his orders, and as a result they have escaped unscathed. Some compounded their wickedness by increasing their budgets. They are being suitably chastised in the report, as are other councils which either did not make cuts or did not cut enough.
The Heseltine version goes on to tell us that by making use of the same powers which authorised him to order councils to cut their budgets the Secretary of State is now fulfilling his warning. The report is the result. Everyone was warned and no one has the right to complain—QED.
The truth is not quite like that. The report is not as straightforward as the right hon. Gentleman would like us


to think or has sought to illustrate. It is the parliamentary equivalent of the three-volume novel by Miss Laetitia Prism which features so prominently in "The Importance of Being Earnest", and whose authoress summed up its contents as follows:
The good ended happily, and the bad unhappily. That is what Fiction means.
According to that definition, the report is not some dry-as-dust parliamentary document but a work of fiction. Moreover, it is a work of fiction that, to quote Lady Bracknell's description of Miss Prism's novel, is "more than usually revolting". The speech with which the Secretary of State introduced it was a tissue of distortions and misrepresentations from beginning to end. Even by his standards it was "more than usually revolting".
To begin with, the authorities that are being penalised did not overspend. It is a fact—it was confirmed by the Chancellor of the Exchequer only last week in the House—that local authority expenditure as a proportion of public expenditure has been falling steadily since the Government came to office. It is now 24·5 per cent. of public expenditure compared with 28·2 per cent. of public expenditure four years ago. It is the Government who have been overspending, and we all know what they have been overspending on. Financing unemployment is now costing the taxpayer £15,000 million a year.
Local authorities did not overspend in the past financial year. They spent more than the right hon. Gentleman wanted them to spend, which is a very different thing. The authorities had a legal right to incur that expenditure. On the other hand, the right hon. Gentleman had no legal right to order them to reduce their expenditure or to threaten them with penalties if they disobeyed him. Far from having any legal power to take these steps, the right hon. Gentleman was acting unlawfully when he did so and instituted a holdback exercise in June of this year. As usual when we consider any action perpetrated by the Secretary of State, detectives must be called in to trace his movements. Sufficient evidence to secure conviction has been accumulated and the House has a right to hear it.
Exhibit No. 1 is the statement made by the Secretary of State to the consultative council on local government finance on 2 June last year, in which he gave notice of his holdback exercise and declared:
my proposal would be to ask Parliament to approve in the autumn a Supplementary Report which would reduce the total of grant".
"Autumn" meant autumn 1981. In case it has escaped anyone's attention, we are now at the end of autumn 1982.
A circular from the Department of the Environment to chief executive officers of local authorities, dated 25 June 1981, warned:
The Secretary of State intends in the autumn to submit to Parliament for their approval a Supplementary Rate Support Grant Report.
Once again, that circular referred to autumn 1981.
On 3 September 1981, the holdback exercise was complete, and it turned out, in the Secretary of State's own word, to be "disastrous". Local authorities increased their aggregate budgets instead of reducing them. The right hon. Gentleman told local authority leaders:
This is a disappointing overall result, and the Government will be obliged to propose reducing the total of block grant by means of a Supplementary Report to be presented to Parliament in the autumn".

Once again, he meant autumn 1981. That autumn 1981 supplementary report, to which the Secretary of State and his officials referred repeatedly, is the supplementary report that the Secretary of State is asking the House to approve. Why has there been such a long delay?
The simple answer is that the Secretary of State could not present the report to the House at the time he intended because it was not then a lawful document. That was admitted in the rate support grant main report, which was presented to this House in February this year. Paragraph 9 of the main report refers to the holdback scheme that we are considering. It declares:
Clause 4 of the Local Government Finance (No. 2) Bill currently before Parliament is intended to clarify the powers under which such a scheme could be operated.
"Clarify" is Heseltinese for "to make legal retrospectively that which was illegal when it was originally done by the Secretary of State for the Environment". Anyone in doubt should study the sixth report from the Select Committee on Statutory Instruments, which said about the main rate support grant report:
The Committee … considered it unusual that the Secretary of State was apparently relying on legislation yet to be enacted to give the target figures an air of legal force, whereas in fact they have none".
Those extremely severe strictures by the Select Committee applied equally to the holdback targets that we are belatedly considering.
This report, which has the Secretary of State's name at the end of it, amounts to a signed confession. Paragraph 10 of the report gives the game away:
It was not entirely clear however whether section 59 of the 1980 Act by itself gave sufficient powers to the Secretary of State to determine the protective multipliers he proposed in June and September 1981. He therefore considered it right, before implementing his proposals, to seek an express power from Parliament to determine multipliers for this purpose.
The words
It was not entirely clear however whether … the 1980 Act … gave sufficient powers to the Secretary of State
are Heseltinese for "it was perfectly clear that the 1981 Act did not give the Secretary of State sufficient powers". The words in the report
He therefore considered it right … to seek an express power
are Heseltinese for "He was told by his legal advisers that if he did not introduce legislation to indemnify himself he would lose any court action that a penalised authority brought against him".
The Secretary of State's lawyers advised him in no uncertain terms that he was behaving unlawfully. The Local Government Finance Act 1982 retrospectively makes lawful the Secretary of State's previously unlawful penalties and targets and even his previously unlawful consultation with local authorities on this matter. The Act does that in section 8. Clause 4, to which I referred earlier, was left behind because the Secretary of State had to continue to amend the Bill to get each part right, if indeed it is right now. In section 8 he introduces a concept previously unknown in British statute law and in human behaviour—restrospective consultation.
The Act blazes a trail in another sense. In carrying out all the retrospective manoeuvres to legitimise the illicit acts of the Secretary of State, it achieves something that was previously believed to be impossible. It makes an honest man of the Secretary of State—retrospectively, of course. In this report the righteous chastiser who acted


unlawfully punishes the wrongdoers who acted lawfully. But does he? In his statement on 2 September last year the Secretary of State complained:
A small number of authorities have ignored the Government's request for economy and have actually increased their expenditure plans by a substantial amount.
Those authorities clearly deserve punishment—or at least that was the impression that we got from the Secretary of State's speech this evening. But do they? Many councils increased their budgets. However, 34 of them—31 of which are Conservative controlled—are not listed for punishment in the report that we are considering. Far from it. Such are the zany follies of the Secretary of State's methodology that all but one of the 34 councils in this special category were requited for increasing their budgets in a somewhat unexpected manner. They were rewarded with increased grant. Northamptonshire responded to the Secretary of State's call for reduced expenditure by increasing its budget by £4½ million,. The Secretary of State reciprocated fearsomely by increasing his grant to that council by £2,150,000. It is an adventure to investigate the reasoning behind the penalties in this report.
For example, this is the formula for calculation of the holdback being imposed in this report. Expenditure below the threshold is defined as
GRP = GRP**+0·6(Total expenditure-GRE)/Population")
Expenditure above the threshold is defined as
GRP = GRP** + (0·6 × Threshold) + 0·75 (Total expenditure-GRE/Population)-Threshold )
"Threshold" is the threshold for the relevant class of authority. "GRP*" is the GRP for expenditure equal to the GRE for the relevant class of authority given above for the estimated close ending schedule. "GRP**" is the GRP for spending equal to the GRE for the relevant class of authority given above for the estimated grant reduction schedule.
Then we have the "ET" factor. Ever fashionable, the Secretary of State has introduced the diminutive extraterrestrial into this report. In paragraph 14(8), E is the current expenditure budgeted for the authority and T is the expenditure guidance issued by the Secretary of State. That leads to the stunning equation.
Disregard = E - T(E - e)/T - t 
It is good to have a little space person with us in this debate because the Secretary of State resembles him in several ways. Like "ET", the Secretary of State comes from an alien world and he arouses revulsion as soon as people set eyes on him.
Like "ET", he blunders around causing confusion and trouble wherever he goes. There are even greater differences between the Secretary of State and the extraterrestrial. After all, "ET" is a being of higher intelligence. He is lovable and people shed tears when he goes away. What may happen when the Secretary of State goes away is something to consider. "ET" needed an interpreter. The Secretary of State has been found to need one because the Select Committee on Statutory Instruments considered this report. After pondering it in puzzlement, the Select Committee asked
for a memorandum explaining the report in terms intelligible to the layman".

The Department of the Environment obliged as best it could, and as it was seeking to represent accurately the Secretary of State's mind, in paragraph 4 it produced what one might call a charitable mis-statement. It said:
It is intended that the proposed reduction in block grant will fall on the individual authorities responsible for the overspending".
This is simply not true. A total of 174 local authorities were guilty of what the Secretary of State called "overspending", but only 104 have been punished with grant holdback; 70 have not. Local authorities that are responsible for spending more than £186 million above their aggregate targets get away scot-free. They benefit from the GREA exemption.
When the Secretary of State examined the list of overspenders, he found to his discomfiture that nearly half of them were Conservative-controlled councils. His industrious officials were set the task of finding an escape route. They discovered that a considerable number of Tory authorities that had budgeted above their volume targets happened to have budgeted below their grant-related expenditure assessments.
The House will recall that the GREA is the national statistic invented by the Department of the Environment to illustrate what services the Department believes each local authority ought to be able to provide at the given rate poundage. The Secretary of State decided to exempt from penalty all local authorities whose budget was below their GREA even if they were spending above their target. It does not matter that the Minister for Local Government and Environmental Services had promised the House during the passage of the Local Government, Planning and Land Bill:
Grant-related poundage and grant-related expenditure is in no sense a prescriptive definition by central Government of what the local authority should spend."—[Official Report, 8 July 1980; Vol. 988, c. 304.]
No matter that that same Minister told me last year that
grant-related expenditure assessments relate to the 'total expenditure' of each authority, whereas the volume targets relate only to current expenditure. They cannot, therefore, be directly compared.—[Official Report, 16 March 1981; Vol. 1. c. 46.]
GREAs were the escape route for Tory authorities, and that was far more important than any past undertakings given to this House. That is why 70 of the 80 Labour authorities that have spent above their targets are penalized and 10 are not, while 21 of the 75 overspending Tory authorities are penalised and 54 are not. That is why Labour Avon at 5·5 per cent. over target is penalised while Tory Cambridgeshire at 9·1 per cent. over target—-nearly double Avon—is not penalised. That is why Labour Tameside, at 1·9 per cent. above target, is penalised while next-door Tory Stockport, at 3·7 above target—again nearly twice as much—is not penalised. That is why Labour Manchester, at 2 per cent. above target, is penalised while Tory West Wiltshire, at 19 percent. above target, is not.
Not only are the victims of these penalties selected quite illogically but the penalties imposed upon them are equally illogical. Merseyside, convicted in this report of an overspend of £36,356,000, is fined £5,140,000, a punishment 14 per cent. the size of the crime. Bedfordshire, shown to have overspent by £4,778,000, is in this report fined £4,194,000, a punishment 88 per cent. the size of the crime. I should add that Merseyside is a 23·5 per cent. overspender while Bedfordshire's overspend is 3·3 per cent. Bedfordshire is being punished six times as


severely as Merseyside for a crime one seventh as great. All overspenders are equal, but some are 42 times more equal than others.
Bedfordshire escapes lightly compared with Watford and Adur, to take two examples of local authorities which, believe it or not, face a grant penalty larger than the amount of money they are accused of overspending. In the case of Watford, the fine is 53 per cent. higher than the overspend. The authorities I have mentioned are advised to count their good fortune compared with certain others which are being fined for overspending when they have not overspent a penny even according to the Secretary of State's own criteria. One local authority is North-West Leicestershire upon which this report imposed a grant penalty of £120,000. North-West Leicestershire has done its accounts, and when all the returns had been entered for the financial year covered by this report it was found that it actually underspent by the small but sufficient sum of £77. Far from congratulating the prudent authority on its economical housekeeping, the Secretary of State is penalising it because its budget was above its target even though its outturn expenditure was not. So bizarre is the Secretary of State's approach to finance that he is far less interested in what this authority actually spent in September 1982 than in what it thought it would spend in July 1981.

Mr. Heseltine: Had the right hon. Gentleman listened to my speech, he would have heard me say that that is exactly what I was not going to do.

Mr. Kaufman: I shall come to what the right hon. Gentleman said he would not do. The right hon. Gentleman had better be careful about saying what he is not going to do. This report does it. This report is taking money away in holdback from the North-West Leicestershire.
The right hon. Gentleman slipped in the claim that he is going to put it right, but in a moment or two I shall explain what the right hon. Gentleman's version of putting it right means to the ratepayers of north-west Leicestershire. The right hon. Gentleman is less interested in what that council actually spent than in what it said 18 months ago it would spend, even though it did not spend it.
The chief executive of north-west Leicestershire has complained to the Department of the Environment but he has given the brush-off in a letter from a junior civil servant which that junior civil servant did not even bother to sign himself. It says that north-west Leicestershire has been penalised by what the Department of the Environment likes to call "the latest consistent information". I allege nepotism in the Department of the Environment. Any official who writes absurd rubbish like that must at the very least be a relative of the Secretary of State.
The House has become somewhat weary of the Secretary of State parading around and proclaiming what he is doing for Merseyside. One of the most deprived local authorities in Merseyside is Knowsley. The Secretary of State makes a tremendous point of telling us of all the initiatives he is taking to help Knowsley. I will tell the House what his initiative in this report is doing for Knowsley. The Secretary of State is fining that authority the massive sum of £1,577,000 in rate support grant

holdback, yet Knowsley should not be fined at all. It took careful steps to qualify for the GREA amnesty and it has succeeded in cutting its expenditure below the GREA. Far from being fully protected, as the Secretary of State claimed this afternoon, and far from being pardoned, Knowsley is being punished.
This is what the borough secretary said in a letter to the Secretary of State:
You will appreciate the efforts made by my Council to both maintain the existing level of services in the area and to improve the environment and encourage employment initiatives, with the support of the Merseyside Task Force. Obviously the severe restrictions imposed by Central Government on local authority expenditure and the prospects of incurring grant penalty restricts the Council in meeting the needs of the area. The further loss of revenue by the withholding of grant and the resulting deterioration of cash flow pending the re-determination of grant entitlement later in the year only serves to exacerbate the Council's financial position in the current year".
That is what the Secretary of State meant when he intervened a moment ago. In the case of north-west Leicestershire and Knowsley, he intends to refund the grant penalty when he asks Parliament to approve a further supplementary report on rate grant support about a year from now.
For a year, those authorities will be deprived of large sums of money to which they have a legal right. For a year, they will lose the interest accruing to those sums of money. When they eventually get the money, it will have been devalued by a year's inflation.

Mr. Den Dover: The right hon. Gentleman said that local authorities had reduced their spending from 25 per cent. to 23 per cent. of total public expenditure. Is he counting only current expenditure, in which case the Secretary of State is to be congratulated on reducing it, or is he combining current with capital, in which case the reduction is due to the capital reductions?

Mr. Kaufman: I advise the hon. Gentleman to refer to the answer that the Chancellor of the Exchequer gave in the House last week. Whichever way it goes, the Secretary of State is not to be congratulated on having reduced this expenditure, because among other things he has said that the outcome of his holdback exercise has been that on aggregate the budgets have been increased.
What is happening to authorities such as north-west Leicestershire, Knowsley and others that I shall mention is all due to the fact that the Secretary of State's legislative juggernaut is beyond even his own control. Yet the system whereby the Secretary of State takes away large amounts of money in grant penalty on the promise that in a year's time he may refund it is the system that he boasted today was "sophisticated and equitable". Truly, the sorcerer's apprentice has gained possession of the book of spells and incantations.
It is not simply individual authorities that have been made to suffer in this way. The Secretary of State promised—he repeated it this afternoon—that expenditure as a consequence of the riots in the summer of 1981 and of the severe winter a year ago would be excluded from target and exempt from penalty. But paragraph 20 of the report tells us that he is no longer doing so. Instead, in a year or so, he will introduce a further supplementary report when, as he puts it,
audited information is available for all authorities".
With the right hon. Gentleman it is a case of "Heads I win, tails you lose". As to removing penalty from north-west Leicestershire and Knowsley, which tell him that they are


underspenders on their expenditure figures, he retorts that he prefers to deal with them on the basis of advance estimates. However, when it comes to relieving the other authorities of penalties, he tells them that he cannot rely on advance estimates and that he must await final expenditure figures.
All authorities, be they underspenders, overspenders or GREA exempt, and whether they provide final expenditure figures or rely on their budget submissions, lose grant as a result of paragraph 14(2) of the report, to which the Secretary of State did not refer at all, and which steepens the slope of the taper. That is the mechanism that reduces grant automatically when authorities spend beyond the threshold above their GREA. This device will increase by 7 per cent. the amount of grant loss that is automatically imposed on authorities that spend above the threshold.
Nor are these matters simply formulae of abstract mathematics that are meaningless to ordinary individuals. All these pettinesses, algebraic equations and breaches of faith have a devastating effect on the quality of local services.
The Secretary of State says that on these matters the Opposition provide the House with sob stories. I shall provide the House with two. I shall give two examples from the 21 Conservative-controlled authorities that have failed to slip through the net of GREA exemption.
East Sussex, scarcely a bastion of Socialist profligacy, is increasing the price of school meals and meals on wheels. It is reducing the number of home helps. It is cutting youth services and adult education. It is reducing cleaning standards in schools. It is cutting fire services. It is closing old people's homes. The Secretary of State would call those scare stories, but the fact is that, while adopting all these damaging measures, East Sussex is suffering grant holdback of £1,807,000 for an overspend of £1,432,000.
The Secretary of State's own county of Oxfordshire is another authority which, according to the right hon. Gentleman is profligate and whose assurances are worthless. Oxfordshire is scrapping child guidance specialists from school psychology services. It is getting rid of the school museum service. It is reducing the number of home helps. It is closing children's homes. It has closed old people's homes where the average age of the residents is 86. At the same time, it is reducing domiciliary care. It is cutting meals on wheels services and increasing the charges for them. That is the profligacy and incompetence which the Secretary of State has denounced in local authorities that are overspending.
This evening, when the right hon. Gentleman and his colleagues vote to approve the report, they will be voting to take £1,526,000 away from Oxfordshire in grant penalty for a £1,270,000 overspend. The Secretary of State is punishing Oxfordshire because he says that it has failed to provide sensible management. The Opposition certainly agree that the details I have given do not provide evidence of sensible management, but our reasons are very different from his.

Mr. Stephen Ross: Is the right hon. Gentleman aware that other counties such as Kent have tried to do away with the school meals service and have found themselves in trouble with industrial tribunals? In fact, they cannot dismiss their school meals supervisors and workers.

Mr. Kaufman: Indeed. One of the problems we have always anticipated is that local authorities that have been forced by the Secretary of State to make cuts will not be able to fulfil their statutory duties if they do so.
It is no wonder that local authorities are looking forward with the keenest anticipation to the forthcoming Cabinet reshuffle in the hope that the Secretary of State will be removed from the Department of the Environment. There are press reports that he is likely to become Secretary of State for Defence. It is undeniable that if that takes place, and if he treats the Soviet Union in the way that he has treated our local authorities, Mr. Andropov will speedily be hoisting the white flag from the Kremlin walls.
It will be a grimmer prospect if he treats our Armed Services in the way that he has treated the local authorities. If so, presumably he will impose spending targets on every regiment, ship or RAF squadron, with penalties for those that fail to conform. If they exceed their targets while they are in action, presumably they will have to stop in the middle and negotiate an armistice. The Army will be required to sell barracks at discounts of up to 50 per cent. to Service men with more than three years' accumulated service. The Royal Engineers will be required to achieve a 5 per cent. rate of return on an annual basis or be closed down.
Each of our Armed Services, before going into action, will be required to invite tenders from private mercenaries to see whether they can do the fighting more cost effectively. All Service men, whether they travel by tank, aeroplane or ship, will have to pay the full economic fare with no subsidy. In line with his spend, spend, spend policy, the Secretary of State will instruct all commanding officers to examine their files to see whether they have any war plans. If so, they will be asked to fight the wars immediately, provided that they are won before the end of the financial year, and provided also that they have no current expenditure consequences. This will be known as the fight, fight, fight policy.
Any commanding officer who refuses to obey will be failing in his fiduciary duty. He will be surcharged with the cost of any military action that the district auditor considers he has brought about unnecessarily and he will be banned from being killed or wounded for five years.
If the Secretary of State for Defence were to treat our Armed Forces in that way, he would be tried for treason. But that is precisely the way in which the present Secretary of State has been treating our local authorities, men and women, elected councillors of all parties and officials, and their work forces, who seek to serve their communities and are harassed and penalised for so doing. That is why it is time that the Secretary of State left the office which he has filled with so much discredit for almost four years. Ft is why we shall be voting against the Government tonight.

Mr. John H. Osborn: I will not follow the comments of the right hon. Member for Manchester, Ardwick (Mr. Kaufman) and his cynicism towards my right hon. Friend the Secretary of State because many people look to my right hon. Friend and, indeed, any successor in his post, to relieve them of intolerable burdens. The speech of the right hon. Member for Ardwick will have given them no consolation.
I shall try to be fair. The problem for Western society is "How does one make ends meet?" We all want everything, but sooner or later we must pay for it. That


applies within a nation and within the regional sectors of that nation. Coming as I do from Sheffield it is to me a much more penetrating issue not only in the Sheffield district council but in South Yorkshire, which my right hon. Friend has mentioned.
There are inherent dangers in a high level of public expenditure. I shall not comment on the consequences of the Clegg report and factors outside it. I shall bear in mind that such recommendations lead to inflation and the high interest rates that have been devastating to industry. I have discussed these issues with the International Monetary Fund and other organisations as a member of the Council of Europe Committee for Economic Affairs and Development. The tragedy in all Western countries is that while the backbone for raising funds for public expenditure—the private sector of industry—has contracted, the public sector both in local government and nationally has been as avaricious as ever. This has been one of the problems facing Britain. Twenty-five per cent. of total public expenditure has been local government expenditure. Because, on the whole, this has been a heavy and a rising amount my constituents want a reduction in the levels of public and local authority expenditure.
I shall support the order. The background statement to the document says:
Since taking office, Ministers have repeatedly stressed that a reduction in the volume of current expenditure by local government is central to the Government's overall economic strategy.
That lesson is understood by my constituents in Sheffield.
The response from local authorities, however, has varied. The majority have reduced their expenditure at the rate suggested; some have reduced their expenditure, but at a slower rate; and others have actually increased expenditure. Because of the extent of the overspending, the Secretary of State proposes to withhold an amount of block grant from local government.
It is an excellent report. The right hon. Member for Ardwick had his fun dealing with the mathematical formulae. It must be accepted that there always has been a complicated formula on the basis of which all Governments have for decades worked out how much the rate support grant should be. There is an interesting comment in the First Report of the Select Committee on Statutory Instruments. It states:
The amount of block grant an authority receives is the difference between their total expenditure and their local contribution. An authority's total expenditure is broadly the expenditure they have to meet out of their rate fund less their specific and supplementary grants … The local contribution is the amount that the authority is assumed to raise from their ratepayers to finance this expenditure.
The Secretary of State referred to the areas where an increase of 4 per cent. had fallen on the ratepayers. My constituents in Sheffield expect to see some action on this front from a Conservative Government. The position in Sheffield is not only making the Government look insensitive and silly but is causing some consternation among the Conservative supporters in the city, whether voters or members of the Conservative Association.
Sheffield has had a Labour-controlled council for about 50 years—with the exception of one year under Alderman Harold Hebblethwaite in 1968. Socialism in Great Britain and in other countries has tended to be hostile to industry and has regarded it as there to be fleeced, although the record of Socialism in town planning—I have in mind the Labour Alderman Jim Sterland—has aroused admiration from many visitors and citizens.
In recent years there have been different pressures on the Labour Party constituency and ward associations. Moderate Labour leaders have been replaced with those who support the Tribune group, Marxists and other extremists. If some moderate councillors have not been reselected, so have the right hon. Member for Sheffield, Park (Mr. Mulley) and the hon. Member for Sheffield, Heeley (Mr. Hooley) been equally unfortunate. Four or five years ago, the Sheffield city council caused concern to a Labour Government under the former Prime Minister. I attended a number of meetings about the complicated formula for industrial areas such as Sheffield. There is undoubtedly a divide in this industrial city.
What has been the cause? I have discussed this with Councillor Heslop, the Conservative leader on the Sheffield city council. Over the years Sheffield Socialists have pursued many policies. I should like to highlight two of those. First is the council housing programme. This has meant cheap rents and heavy subsidies from the rate fund or central resources. There are about 90,000 council houses in the city. The sale of council houses might reach 2,000 immediately, and the maximum would not exceed 5,000 or 5 to 5½ per cent. of the total in due course.
The result has been that too many of the citizens of Sheffield have become accustomed to cheap and subsidised housing—not recently but over decades. The concept of paying an economic price for housing has eluded them. Too easily they turn to local Socialists to give them "Owt for nowt", an expression understood in Yorkshire. It follows that the majority of voters do not expect to have the pride of ownership. Therefore the housing account in Sheffield has had to be topped up.
I can list other problems in Sheffield at the moment. It appears that the rate increase could be about 10 per cent. Local authorities now depend on the statement of the rate support grant and have to make their own decisions of what the cost of housing will be. Sheffield has chosen to spend vast sums on reorganising its housing administration. That cost will fall on the ratepayer and is of concern to Conservative councillors.
The Transport Bill is before the House at the moment. Public transport is a south Yorkshire problem, but falls on all the district councils, including Sheffield. As the secretary of the Sheffield chamber of commerce put it, "Do you want cheap bus fares or jobs?" The figures are well known to hon. Members. The income from fares in south Yorkshire is about £15 million. The costs are about £75 million, and therefore the subsidy has been about £60 million. As a result of the Transport Bill, that sum will fall to £40 million. Those who live in rented houses expect Socialists to keep the rents cheap. Similarly, wage earners, some of whom live in council houses, are used to the subsidies that have for decades been given to public transport. The majority of the voters who live in council houses and who use buses are being subsidised by industrial ratepayers and perhaps by those domestic ratepayers who live in residential areas and who own cars. They can easily be drawn into perpetuating an anomaly in local democracy. Too many—the majority—are given a subsidy for housing and transport at the expense of others, including industry and commerce, which from now on will be at the expense of their jobs.

Mr. Stanley Newens: Is the hon. Gentleman really saying that low fares and rents have damaged Sheffield? He attributes iniquities to the Tribune Group


and to the Left wing, but he does not say that the Government's policies have done far more to damage industry in Sheffield and in most other parts of the country than any burden on the rates.

Mr. Osborn: I rather wish that I had not given way, because that is the sort of poppycock that unfortunately disturbs people. The fact is that Sheffield is broke because people are not used to paying their way by paying an economic price for public transport and council housing, for instance.
Ratepayers object to the waste of money. I have before me a pamphlet entitled "Why 140 Local Authorities Believe In Being Nuclear Free". It is available in Sheffield city libraries. I wrote to the Minister responsible and the Under-Secretary of State Lord Bellwin replied saying:
whether expenditure by local councils on propaganda campaigns of this type is really likely to persuade the public at large that they should be given even greater freedom to spend public money, I must leave it to you to judge".
The subsidisation of public transport gives rise to concern, because ends do not meet. I have received many letters from industrialists, from the chamber of commerce and from the chamber of trade. I have received letters from those who run industry. They are on their knees. The report offers them the hope that the city will not be extinguished because of the profligate expenditure that is being undertaken. The Under-Secretary of State again wrote to me as follows:
I note the extreme concern … about the level of rates in Sheffield. I am sure I need not repeat to you our determination to secure reductions in the level of local government expenditure, by increasing the pressure, through the grant system, on authorities like Sheffield, to reduce their expenditure. Of course I realise that Sheffield is not inclined to heed our call for economy and has in the past merely passed the grant penalties it has incurred by its irresponsible spending decisions on to the ratepayer. However, I believe our strategy is the right one … I very much sympathise with those who are having to bear the cost of Sheffield's determination to defy the Government".
Another letter referred to South Yorkshire county council and added:
you can see only 46·8 per cent. are ratepayers or potential Conservative voters. It is a situation of a dictatorship".
Another constituent of mine referred to a circular entitled "How You Spend Your Money" and said:
I … find it very hard to believe that domestic rates are only worth 3 per cent. of one's weekly/annual expenditure—we reckon it is much nearer to 20 per cent. and I'm sure many people living in Hallam constituency must feel the same. I know the Conservatives are at present fighting a losing battle with the local council on the issue of rates".
Even the chamber of trade has written to me about the fact that the local authority has blamed the government for the burden on commerce and industry. Those letters are encouraging. However, I have received a letter from a branch chairman of the Conservative Association. He wrote:
The most important thing which seems to worry people here is the high rates. As you know in the Broomhill area we still have a mass of elderly people who are distressed at the fact that the Government seems to be doing so little about the rates system.
Last night, the Select Committee on Education, Science and Arts had a chance of questioning the Secretary of State for Education and Science. Sheffield was often cited in relation to the cost of the project run by the Manpower Services Commission to give everyone who leaves school a place in the scheme. There was concern about the cost to local authorities. This is a question of the chicken and the egg. High rates will drive away industry. Indeed, industries are driven away daily in Sheffield. In addition,

high rates are a contributory factor in the rising level of unemployment and perhaps in the collapse of the steel industry.
I welcome the schemes put forward by the Secretary of State for Employment but like the chicken and the egg, high rates demand high expenditure to deal with their consequences. My constituents are concerned about that. The local authority in Sheffield has never been amenable or kind to industry. Recently I have had to advise several companies on whether they should stay in Sheffield or go somewhere else where they will be treated better and where the rate burden will be less. One or two have had to follow my example when I found it difficult 30 or 40 years ago to develop industry inside the city boundaries when I embarked on industrial development. They have had to look elsewhere and that is having an even worse impact on the city.
Like my constituents I welcome the report. My right hon. Friend the Minister for Local Government and Environmental Services wrote to me on behalf of my right hon. Friend the Minister as follows:
Having carefully examined the 1,100 or so responses we had to the Green Paper, 'Alternatives to Domestic Rates' we are urgently studying the complex issues involved.
I hope we shall be given some intimation of when that review is likely to be completed. Unless city councils such as Sheffield city council and county councils such as South Yorkshire county council have their profligate expenditure controlled, the Prime Minister and her ministerial colleagues will find that many of their supporters have gone under before the next election.

Mr. R. B. Cant:: I have been present at some very thinly attended debates during the past 17 years, but it was only as I sat here in solitary splendour at the beginning of the debate that I appreciated what Nye Bevan meant by being sent naked into conference chamber.
Local government is such an exciting subject, I do not know why it is impossible to find more hon. Members from both sides of the House who are willing to discuss an arm of government that makes such a massive contribution to the welfare of the British people. Perhaps there is a financial threshold. Until we reach £20 billion of current local authority expenditure, hon. Members may not take the subject seriously. On Thursday I assume that the Secretary of State will announce that we shall reach the magic figure of £19 billion plus £1 billion. Perhaps that will transform the situation.
It is difficult to follow my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman), who made another devastating onslaught on the Government. He has a wonderful literary knowledge and massive intellectual insight, which gives every one in the Chamber, apart from yourself, Mr. Deputy Speaker, an inferiority complex. My contribution will be at the lower level of the humble local government practitioner. I have been involved in local government for 30 years, but I still do not understand local government finance. That is pardonable in the light of some of the formulas read out by my right hon. Friend the Member for Ardwick.
The Secretary of State talked about the fact that local authorities knew what was coming and should have planned their expenditure accordingly. He said that they could see the trend as long ago as 1979. The Secretary of


State should look at the evidence—I am not talking about the people in the esoteric tower blocks in Marsham Street—from the grass roots and listen to the councillors, not just Labour councillors but many Tory councillors as well.
I have tried to jot down a history of what happened. I shall be parochial. In Staffordshire we budgeted for 1981–82. The Tories cut expenditure by £10½ million. A letter was received from the Department of the Environment about three weeks later, on 28 January, which gave new expenditure targets. It meant further reductions of £9½million. During the Staffordshire county council debate, the Conservative leader said that it was far too late to do anything about the budget that was being discussed. That was a perfectly reasonable reaction, even from a Tory, but he must have felt extremely disloyal to his Government.
In June 1981 the Government announced their proposed penalties and called for revised budgets. By that time the Labour Party was in office and the county of Staffordshire was about £9½ million below target. We were told that a penalty of £6 million would be imposed unless we could get ourselves off the hook by cutting expenditure in some way. We reviewed the budget and found it impossible to introduce the major policy changes necessary to make further cuts of £9½ million within time. We made a reduction of about £2 million and explained to the Secretary of State why we could not do better.
In September 1981 the Government extended the exemption from the penalty to local authorities whose expenditure was at or below their grant-related expenditure assessment. Alas, we were still £8½ million in excess of our GRE.
Excessive changes of mind are a characteristic of Government policy. One never knows what the Government will do next. Let us leave elected representatives out of the picture altogether. The policy changes are confusing and bewildering for local authority senior executives who have been employed for over 30 years. We have to respect their reaction. Far too many of them are seeking early retirement as a result of the Government policies, which are no doubt dictated by Whitehall civil servants. Such early retirements are unprecedented in local government history.
In December 1981 the county council was notified that the GRE was to be increased by £4 million. The Minister of State wrote to us on 11 December and drew our attention to the revision. He pleaded with us to do something as we were only 1·2 per cent. above our expenditure level. We responded and became exempt from the penalty. That 12-month history of local government finance is a mess. There were changes of mind, principles and regulations. Local authorities did not know what the next step would be
The Minister is a reasonable man. We know that he is just marking time and is destined for greater heights. If this country must have a Tory Cabinet, I believe everyone would agree that he should be a member of it. However, while he has his present job, he should bring some of his excellent common sense and reasonable philosophy to bear on some of the nonsense that masquerades as Government policy.
It is one thing for Ministers and civil servants who sit in offices and speak in the Chamber to talk about overall

cuts and global sums. It is quite a different thing if one is at the other end of the spectrum, down in the shire or the borough carrying out the policies. I know that there are some Labour authorities, and no doubt some Tory authorities when the Labour Government are in power, that are so ideologically opposed to central Government that as a matter of principle they would not do anything that the Government wanted. There are some moderate Labour authorities that are willing in certain circumstances to take action. They are prepared to go some way towards co-operating when the Government announce their policies and cash limits. The local authorities get on with it although it is not always easy.
Let us assume that one is, like myself, a chairman of an education committee. The Government say that expenditure must be cut by so many millions and the share of the Staffordshire education committee is x millions. I know civil servants believe that in the towns and shires a magic wand is waved and the cuts are made. They believe that the political will is all that is required. That is absolute poppycock and nonsense. One has only to study the practical problems. With falling rolls it is argued that one can get rid of teachers. I should like to have placed before me an example of an authority that has actually sacked teachers. I have been present when the top echelons of the National Union of Teachers have demanded an undertaking that no teacher shall be sacked. Whatever the institution or department—NALGO is another example—it is extremely difficult.
The Minister of State will say that in the interests of financial probity, to achieve the cuts and to avoid the penalty, the teachers should be sacked and a strike faced. There are, however, severe limits on the power that local authorities can exercise to overcome some of the difficulties. We have made considerable economies through the redeployment of teachers. By the end of this year, we shall have reduced the teaching establishment by 800 teachers.
Another aspect of the matter—I refer again to education—relates to the circulars received from the Secretary of State for Education and Science. There was the famous circular that stated that as school rolls were falling, schools should close. It is all very well to say that schools should be closed. The mechanics are forbidding. One has to serve all sorts of notices and stick bits of paper on walls, posts and buildings. There has to be a long-drawn-out consultative process. This does not take a couple of weeks. It can last anything up to four months. After that, the Secretary of State may say that he intends to give people another two months to consult him. A further two months may elapse before the Secretary of State makes up his mind. It is not, of course, the Secretary of State making up his mind. It is the civil servants. As the Minister of State must appreciate, the civil servants are involved in a new exercise and a new dimension to their activity to which they are not accustomed. They have to learn their trade.
We are not talking about pennies. We are talking about millions of pounds. It is all very well the Minister suggesting cuts. The Government have to appreciate the difficulties implicit in all the procedures that are required to implement cuts. I wonder whether the Minister of State, or the Department of the Environment, ever hold discussions with other Departments about the ramifications of the cutting exercise. I wonder whether they discuss clearly and carefully whether the time scale is practical.


I do not suppose that they ever speak to other Departments. I wonder, for instance, if they speak to the Department of Industry.
We are being urged, as a local authoriy, to spend more money on computers and microelectronics. I am probably, Mr. Deputy Speaker, going beyond the terms of the debate. I am, however, trying to explain why Staffordshire county council finds it difficult to achieve the level of economies or, to use the euphemism, the savings, that would enable us to escape the penalty. It is not only a question of making savings. Enormous pressure is put by other Departments on local authorities—I have cited the Department of Industry—to spend more money. What sort of response do we make? Do we say that the schemes of the Department of Industry and its bait of half-price computers are excellent but that we have been told by the Secretary of State for the Environment that we have to cut expenditure?
Where is the synchronising of policy that will bring about reasonable cuts? There are difficulties about doing the job even when one has shown that one is willing to put into operation policies that will lead to the sort of savings that the Government want. The Secretary of State does not appreciate the difficulty of achieving certain savings when the objective has to be realised within a short time. There are a large number of examples that could be given. I make an appeal for greater clarity in defining the objectives. When this does not happen, there is massive confusion.
Conservative Members laugh about the problem, but if they could appreciate, from the other end of the operation, just how ridiculous some of the changes in policy appear not only to officials and elected representatives but to the public, they would be surprised. We read constantly about the need for cuts, savings, and so on. Suddenly the Secretary of State gets up and tells the local authorities that they are grossly underspending and should spend more. People wonder what this is. Then we get some of the jargon.
Local authorities are told that they are underspending not on current account, which is where they are overspending, but on capital account. In particular, they underspend on capital account because they are not spending capital receipts. Local authorities then have to make a tremendous effort somehow or other to find projects on which to spend money before 31 March. People begin to wonder whether the Secretary of State has gone mad or whether there is a reasonable explanation of the exercise, or both.
A week later there is another announcement in the financial press to the effect that the Secretary of State has been overruled by the Treasury. All the projects brought together by the local authorities to spend their money on to appease the Secretary of State have to be cut in half as the Treasury has said that only half the capital receipts can be spent. Somehow, local government survives the Secretary of State.
I shall not put my opinion into the words that my right hon. Friend the Member for Ardwick would use, partly because I am too polite and partly because I cannot think of the appropriate words and phrases. These are points that the Secretary of State should take up. He will say that he can point to some good loyal Tory authorities that have managed to make the cuts. However, is it worth it? Is it worth causing all the trauma that arises when one is determined to sack all the kitchen ladies, get rid of school meals, disrupt the teaching staff and 100 other things?
On Thursday, the Secretary of State will announce that he is cutting the rate support grant from 56 per cent. to 53 per cent.—a cut of 3 per cent. I sometimes think of the story now circulating about Brezhnev, who has gone to Heaven. He meets Peter, Tsar of all the Russias. Peter asks him what it is like now in Russia and Brezhnev say s "We have the largest army in the world; we have the best intelligence service; we have a submarine service that will guarantee that there is always complete security for the Russian people; and vodka is 3 per cent. stronger." Whereupon the Tsar of all the Russias says "Three per cent.? Was it worth a revolution?" The Government should address themselves to that point.
Before I go on to my peroration, I wish to clear up the point that forms my main reason for addressing the House, and which was referred to by the Secretary of State. I thought that he had made a concession. However, where local authorities have made savings, or cuts, to the extent that this will get them off the hook of the penalties, they are still being penalised because they have not, in the case of Staffordshire county council, got the money.
This is a cri de coeur from the county treasurer of Staffordshire. It is most inequitable for the council to have to wait a full year before its position is recognised. Our annual returns showing the final position were sent to the DOE and the district auditor for certification in October 1982. If no concession has been made—and I would rather believe the pessimistic view of my right hon. Friend the Member for Ardwick than the Secretary of State—we have nothing less than legalised robbery. We have fulfilled our part of the bargain, we have got off the £6 million penalty, but we shall not get the money, although that is the wrong way to put it, for another year. This will cost the Staffordshire ratepayers £½ million in interest. That is unjust.
We have been down, as no doubt other local authorities have been, to see Lord Bellwin. I thought that he was making a sympathetic response and was moved by our appeal. Unfortunately, I was sitting close to him and in the wide margins of his brief I could see the words "resist at all costs" in red. I hope that the Minister will think about his policy again. These amounts are peanuts to the Government, but £½ million extra in interest charge for a local authority is a serious item of expenditure. If nothing else comes out of the debate, the Minister should concede this point.
I am becoming a bit sick and tired of the way that local government is blamed every time there is some sort of economic crisis, whether it is a run on sterling, the deindustrialisation of the nation or the excessive rates of interest. Everything that happens is supposed to be a consequence of something that the people in local government are doing wrong. They are always tremendous spenders and excessive employers of labour.
However, as the Secretary of State conceded, the one remarkable thing is that the current expenditure of local authorities has been what The Economist called this week "stubbornly constant" during the Prime Minister's period in office. Nearly everything has been "stubbornly constant". I do not see how that can be interpreted as a runaway financial wagon. As the Secretary of State conceded, manpower employed by local authorities has decreased—he did not use a figure by 4 per cent. That is not a bad record.
The hon. Member for Sheffield, Hallam (Mr. Osborn) brought here the heartrending complaints of the


industrialists to the effect that rates are the cause of all their problems. The most significant thing about local government finance is the shift from the taxpayer to the ratepayer. The effective rate of rate support grant has gone down from 65 per cent. to 50 per cent. It is that shift in the burden of taxation on to the back of the ratepayers that is more significant in this context than anything to do with local government spending.

Mr. John H. Osborn: Will the hon. Gentleman bear in mind that ratepayers are the providers of jobs in Sheffield, in the form of shops—one shop in Sheffield, called Schofields, left the city for that very reason—commercial enterprises and business? I agree with the hon. Gentleman that the ratepayer is the provider of jobs, but the ratepayer cannot stand it, and that is why I spoke earlier this evening.

Mr. Cant: The hon. Gentleman would get his reply if he were to read the second leader in the Financial Times of, I think, 12 July this year, although I cannot remember the date exactly. I do not know who wrote the article. The point is clearly made that this attack on the rates by industrialists is a hardy annual. It comes when other forces in the economy depress profits, and rates are then attacked by business men. It has nothing to do with the real problem.

Mr. Greenway: The right hon. Member for Manchester, Ardwick (Mr. Kaufman) delighted the House earlier with quotations from Oscar Wilde, including Lady Bracknell, who also said in the "Importance of being Ernest":
Ignorance is like a delicate exotic fruit; touch it and the bloom is gone.
Ignorance on this matter is quite inexcusable. In his extravagant assertions, is the hon. Gentleman unaware of what the London chamber of commerce has written about the effect of rates on jobs? Is he also unaware of what has been said of Sheffield and other cities, including Stoke-on-Trent, that every time a firm's rates go up by £5,000, a job is lost. Those are hard facts.

Mr. Cant: I prefer my ignorance to that wild assertion. It is pathetic how all the chambers of commerce now are writing to Members of Parliament trying to indict local authorities, as the main contributors to their welfare. Let us look at the state of British industry and commerce. If the rates are the cause of their present malaise, I shall go back to school and learn some different lessons.
Even if the Minister of State and the Secretary of State get the average rate increase down this year, as is generally expected, to 9½ per cent., the fantastic system that they have developed through grant-related expenditure and so on, produces differences in the outcome, above and below the average for different authorities, which are creating much heartache for councillors, ratepayers and others. I would not say "Come back multi-regression analysis all is forgiven", but if this is the end product of the new system that has been devised, which was intended to have the attractive qualities of simplicity, equity, and so on, the sooner we get another Government and another system the better.

Mr. Tony Durant: I am sorry that the right hon. Member for Manchester, Ardwick (Mr.

Kaufman) is leaving the Chamber, because I wish to allude to his remarks about the Armed Forces and their budgetary principles. When his party was in government and a few of us visited a regiment that had been amalgamated by his Government, we were given a short display of armaments and so on. The commanding officer told us that the amount of ammunition that he had just expended was his allocation for the year. That was under a Labour Government. I am not against that type of control, but it should be understood that the forces have tight allocations, just like anyone else. We should not give the idea that the forces have a free hand in this respect, because they certainly have not.
I wish to say a few words about local government expenditure in relation to a management concept. One of the difficulties is that we have had a long period during which local government has had generally an increase in expenditure. For a long time both political parties have encouraged local government to spend more on this, that and the other. The officials of whom the hon. Member for Stoke-on-Trent, Central (Mr. Cant) spoke have been used to an atmosphere in which it was permitted to continue to increase spending. The Labour Party began the process of checking that trend. Anthony Crosland, in his famous speech, said that this continual upgrading of expenditure could not go on. However, the Labour Party did not sustain that policy. It sustained it for a short time, but then it weakened and allowed the increase to go on.
The problem is that local government is not used to tight financial control. That is a new phenomenon. The hon. Member for Stoke-on-Trent, Central was rather withering about commerce and industry. He also said that it was difficult to change direction, that it took time, and that things could not be done overnight. In commerce and industry one often has to do things overnight. One often has to meet all night to make a budgetary decision, and take action on it. That is what it is all about. One cannot just drift on day after day saying "We have to consult this person and that person".
I agree that Governments are responsible in part for the trouble. The hon. Gentleman told us of the difficulties in trying to close a school. We should consider that. The Government must grasp the nettles. If we are to have tight financial control, we shall have to streamline procedures. I accept that we have made it more difficult to do that, but we must accept that it has to be done and we must have better management in local government.
The chambers of commerce, which have been mentioned several times in this debate—sometimes witheringly, and sometimes with encouragement—have offered to put in people to look at the budgeting of local authorities and give advice about how to control expenditure. In some places the process has started, with quite fruitful results. In other places the offer has been spurned. Nevertheless, it can be done. In my opinion, the Government must get a grip on all this public expenditure. We have not gone even halfway yet.

Mr. Arthur Lewis: I agree with the hon. Gentleman, but, no matter which party is in power, central Government are the worst offenders of all. Local government was not responsible for the Property Services Agency, which lost millions and millions of pounds. No one was punished. Every day, one can read about millions of pounds being wasted by this "efficient" Administration. Never on your life. The blame is not all on local councils.

Mr. Durant: I support the hon. Gentleman's argument, but I shall not pursue the point because we are debating local government and I must keep to the point. I have my views on the PSA too. I accept his point that the Government are a principal offender in this matter and that local government overall has not had a bad reputation for controlling expenditure.
To roll back local government expenditure is much tougher and more difficult. It requires even tighter management control than in the past. We cannot say complacently that all is well, because it is not. We can all think of instances of wasted expenditure. It is the little sums added together that cause part of the trouble. The £250,000 here and the £250,000 there soon add up. We must look at the whole question of management.
My local authority—Reading—has incurred a £600,000 cutback. The leader of my council says that if he were in control he would not have incurred that penalty, that it is due to the Labour and Liberal groups which have pushed through stupid schemes. In Berkshire, where nobody has overall control, there has been a 27·5 per cent. rate increase. I interrupted my right hon. Friend the Secretary of State's speech today to point that out. That figure was promoted by the Liberals. There is no way that they can get away from it because it was their stated aim. The Conservative Party's figure was 13 per cent.

Mr. Arthur Lewis: I know that the hon. Member for Reading, North (Mr. Durant) is a fair and honest man and that he knows the rules of the House. However, it is not the usual custom to attack hon. Members in their absence. There is not one Liberal Member here. The hon. Gentleman should be fair and withdraw his remarks. He should say that had the Liberals been here he would have attacked them. He should ask them to come on occasions to hear such attacks.

Mr. Durant: I take the hon. Gentleman's point. However, I raised that point when a Liberal Member was present, so I am not saying anything that I have not said already to them.
I want now to talk about the effect of the 27·5 per cent. rate increase in Berkshire. My constituency is a comparatively prosperous area in Britain. We have our problems. We have unemployment, but, in comparative terms, it is not bad in my area. It is in the famous Thames Valley which is supposed to have the silicon chip, computers and so on. However, it is interesting that several fines that have considered moving to Berkshire from central London, for various reasons such as rates, staff costs and so on, are looking further down the valley towards Swindon as a result of that 27·5 per cent. rate increase. Rates have a bearing.
The headquarters of the Metal Box Co. Ltd. is in my constituency. That company's rate payment, for all its factories put together, was £9 million last year. I do not know this year's figure, but it is probably even more. That is not a small sum which can be spurned. It is a lot of money for a firm to find. We should not say that industries can meet such figures themselves. It is a serious matter for them. It is an overhead from which they get no relief. It must be passed directly on to customers, along with inflation costs and so on, when at the same time they are trying to compete in a world market. We cannot dismiss such matters lightly.

Mr. Cant: My point was that industry and commerce have been brought to their knees not by rates but by all the other aspects of Government policy. However, when such companies are on their knees they will feel the burden of rates.

Mr. Durant: I trust that the company to which I referred is not on its knees. I should be appalled to hear that. Therefore, I deplore the hon. Gentleman's approach. That company is not on its knees, but it has been to see me about the enormous sum of money that it has to pay in rates, which cannot be set to one side. It must be borne in mind when the company is considering its future planning.
Another major company, whose name it would not be wise for me to mention, came to see me about the future of rating because it was considering moving to my area. That company considers rates to be an overhead. Take the example of a corner shop which helps widows or families who need only a few goods, and people who have difficulty in travelling into town. Such shops might employ only one man and his wife and rates would be an enormous part of the overheads. Apart from electricity and gas, I imagine that rates would be the biggest item of the overheads of such a shop. One only needs to consider the disappearance of the corner shop to appreciate the importance of rates to the shopkeeper. I accept that rates are not the only factor, but it is a big factor when one is competing against supermarkets and so on.
Although I am a supporter of local government, it cannot be sufficiently emphasised that it cannot escape the disciplines of the world and say that its outlay has nothing to do with it. That is not true. We are all involved in this together. I am looking for financial probity, expertise and management. The difficulty is that a councillor is a part-timer. He does not have the time to search out information. He is in the hands of his officers. That is why it takes time to roll back expenditure. It also takes courage.
When I joined my council, I remember that I moved to delete something from every committee's budget. One item that I remember deleting was chicken wire for the ducks in the park. I got a pal of mine to second the motion and I had every budget sent back. I was the most unpopular man in the council. We were there until 1 am. Nobody wanted to speak to me and I was alone. However, I believed that public expenditure was too important to treat lightly. I do not say that that approach worked that year, but the following year people remembered that I was still there. They feared that I would ask about various things and so they pruned. That is how councillors can do a better job. They can ask penetrating questions again and again. It is a boring job, but it must be done.
I remember when we redeveloped my town centre. It was a £1·5 million project in combination with Norwich Union. Nobody appeared to want to speak in the council chamber, so, believing that somebody should say something, I made a speech about the project. I welcomed it. An hour later in the council chamber we spent an hour discussing the redecoration of the chairman's office which was to cost a mere £10,000. Everybody understood £10,000, but not £1·5 million. That is the problem.
Councillors must come to terms with the problem. There must be better and tougher councillors. The other day I met a very old boy in Reading. He had been chairman of the finance committee for some years and he told me that when he held office the rates in Reading went down


every year. That was because he was tough. He was not the most popular man in Reading, but he did his job and reduced expenditure. The rates were kept down and the residents were happy. I stress that we must look much more towards management in local government.
I have said time and again that local government reorganisation was not a success. I am on record as saying that we made the units too big. We lost the county boroughs which had a great deal of merit because they provided tighter control and better management. Such changes are part of the problem, but we must come to grips with it.
The hon. Member for Stoke-on-Trent, Central should rethink his views on industry. He will find that if we can reduce rates industries will be helped considerably. That is what we must do constructively and helpfully as quickly as possible.
I welcome the report. I know that it is complex. We have had jokes about the formula, but let us be fair to the Government. There has been a peculiar formula ever since time immemorial. We could not find out what the formula was in the past. I bet that there was a similar formula in the past. It is a complex matter.
The right hon. Member for Ardwick rightly said at the local authorities conference in Torquay on 24 September 1981—this is the chief Opposition spokesman for the environment speaking:
I do not deny the right of Government to impose specific duties for which it has an electoral mandate. We" —
that is a future Labour Government —
may require local government to perform certain specific duties.
The right hon. Gentleman is not frightened for the Government to impose their will on local government. He has said that that will happen. Let us be clear that the Labour Party thinks that it has a role to play in dealing with the costs of local government. There is a two-party agreement on that. The only argument is about the way in which we handle it. Let us be clear that there is cross-party agreement on controlling expenditure. I urge those in local government to be more management conscious in the way in which they perform their duties because that is the key to success in getting rates down, making a prosperous country and making useful and progressive local government.

Mr. John Cartwright: I agreed with the hon. Member for Reading, North (Mr. Durant) when he said that he wanted to see greater involvement of local authority members in the control of local authority expenditure. That would be a much more efficient and effective way of dealing with the problem than having a system of control imposed from on high. That is one reason why I object so strongly to what the Government are doing.
The points that the hon. Gentleman made about the impact on rates on businesses are right as far as they go. There is agreement on both sides of the House that rates have an impact on businesses. It would be foolish to deny that. A business that is fighting for its very existence in a recession may find that a sudden rate rise pushes it over the edge. There is a difference in view in the House. Conservative Members constantly seem to imply that rates

are the only problem that drives firms into difficulty. However, that is manifestly not so. Rates are one of the problems and on occasion they can have a major impact, but many other difficulties cause problems for firms.
It is strange for a member of the Social Democratic Party to be providing about 50 per cent. of Opposition Back Bench contributions to the debate. I am sure that the hon. Member for Newham, North-West (Mr. Lewis) will agree that in the old days of the Labour Party, a Whip would have been dispatched by now around the Tea Room, with the usual knee-tapping gentility used on such occasions, to encourage more hon. Members to speak in the debate. Unfortunately there has not been an Opposition Whip on the Front Bench during the debate, so that prospect is not open to the Labour Party.
One problem is the mind-boggling complexity of the report, to which hon. Members have referred. I am sure that hon. Members take one look at the multipliers going to six decimal places and decide that that is not for them. If they get as far as examining the extraordinary mathematical formulae, to which the right hon. Member for Manchester, Ardwick (Mr. Kaufman) referred so dramatically, I am sure that that is a major deterrent to taking part in this important debate.
We should be grateful to the Select Committee on Statutory Instruments (Joint Committee), which took one look at the report and decided that it should draw the
special attention of the House to the instrument on the ground that its purport calls for elucidation.
The strikes me as a clear grasp of the problem. We now have a memorandum that is described as being drafted
in terms intelligible to the layman".
It is marginally more intelligible than the original document, but it is still fairly complicated to grasp.
If one is talking about greater involvement of local councillors in controlling local authority expenditure, it would help if they were able to understand what the measures are about. We would get more co-operation if people could get their minds round some of the formulae that are set out in the report. Hon. Members have said that the rate support grant has always been complex and an issue that treasurers understood, but comparatively few local authority elected members understood. However, the complexity is now on a totally different plane—perhaps an extra-terrestrial plane—compared with the past.
I am strongly opposed to the principle of centrally fixed spending targets for individual local authorities. I am old fashioned enough to believe that decisions about local spending ought to be taken by local people in the light of local circumstances. That is the essence of local government. I do not believe that we should allow mandarins in Marsham Street, however well informed they are, to take over the role of local authority elected members.
I accept that there are overspenders in local government. There have always been overspenders. There have always been local authorities that are wild and reckless in the way in which they go about spending ratepayers' money. If they exist, they should get their come-uppance from the local electors. We should seek to strengthen the way in which local people can have more accountability, supervision and control over local authority elected members so that if they are acting unreasonably or irresponsibly, the local electors will sort that out. That is what local government and local democracy are all about.
Grant related expenditure calculations are explained in paragraph 11 of the explanatory memorandum. I shall quote from it because it is central to much of what is going on in the block grant allocation system. It states:
An authority's grant related expenditure is an assessment of the amount that it would cost the authority to provide a standard level of service in its area. It is therefore a measure of the authority's relative need to spend.
That is extremely important. The paragraph continues:
The figure for each authority is arrived at by applying certain objective factors or indicators to the particular circumstances of each authority. The factors or indicators are built up in consultation with local authority associations by detailed analysis of each local authority service.
That sounds an impartial and scientific approach until one looks at what it produces at local level. I shall give my local authority, the London borough of Greenwich, as an example. In 1981–82 its grant related expenditure assessment was £31·9 million. That is apparently the objective assessment of the authority's need to spend. Its actual spending in that year was £46 million. Therefore, there was a major gap. If there was a determined attempt to get down to the grant related expenditure assessment figure, there would have to be cuts of 30 per cent. to 40 per cent. Greenwich has never been included in the black list of profligate overspenders. Under new management at the town hall it may figure in that list in the future.
When I look at some of the individual services and compare the grant related expenditure assessment with the actual spending, the situation becomes more alarming. For social services the GRE was £9·8 million, but the actual spending was £16·8 million. For libraries the GRE was £1 million but actual spending was £2 million. For parks the GRE was £1·4 million but actual spending was £2·6 million. For housing the GRE was £4·9 million but actual spending was £7·8 million.
Therefore, there would have to be cuts of about 50 per cent. in social services, housing, libraries and parks if we were to get the Greenwich figure anywhere near the GRE. Critical though I am about spending in certain areas in the London borough of Greenwich, I recognise that such cuts are impossible. The Government, to be fair, recognise that too. They have not set Greenwich the target of getting down to the GRE. Its expenditure guidance is calculated in the complex formula in the report.
The target for Greenwich at November 1980 prices was £31,838,000. It actually spent £32,949,000. Therefore, the overspend was a little more than £1 million. On my calculations, that means that Greenwich will secure the prize of partial protection for 1981–82 and not all the penalties will be exacted. That is based on the final out-turn spending for 1981–82.
As other hon. Members have pointed out, the penalties in this report are based not on final outturn of expenditure but on the revised estimate that was made in the summer of 1981. On that basis, Greenwich is penalised for spending not £32·9 million but £34,068,000. Greenwich is one of the authorities whose final spending turned out to be a good deal lower than its revised estimate. It will therefore have to wait until further alterations are made in a year or two from now to sort out the fact that the overspending is not at the level suggested in the report. Therefore, Greenwich will be one of the authorities that suffers a direct cash flow disadvantage as a result of the way in which this administrative arrangement is being conducted.
The effect of changes in block grant have been dramatic in Greenwich as in other areas. I agreed with the hon. Member for Stoke-on-Trent, Central (Mr. Cant) when he said that the great switch has been from central taxation to the local ratepayer. In 1978–79, 56 per cent. of Greenwich's spending was met by grant—£27·9 million out of a total of £50·2 million. By 1981–82, that percentage had dropped to 40 per cent. and it is likely that in 1982–83 it will drop still further to 34 per cent. That demonstrates the trend that the hon. Member for Stoke-on-Trent, Central pointed out. The grant loss this year is likely to be £12 million and approximately £20 million in 1982–83.
The impact on the Greenwich ratepayer has been considerable. Including the expenditure of all rating and precepting authorities falling on the ratepayers in the borough, expenditure in 1978–79 was £50·2 million. By 1981–82, that had increased to £79·8 million—an increase in three years of £29·7 million or about 59 per cent. That is roughly in line with the rate of inflation during those three years. But reduced Government grant has meant that the rate for spending has increased, not by 59 per cent. but by 92 per cent. and the burden of rates paid by the domestic ratepayer has increased not by 59 per cent. but by 115 per cent. That demonstrates the way in which the transfer of the burden to the shoulders of the domestic ratepayer has been conducted. The domestic ratepayer may have expected an average payment of £4 a week on the basis of past performance but it has turned out to be almost £6 a week as a direct result of the cuts in central Government grants.
As far as I understand it, the Government's case for this complex operation is set out in paragraph 3 of the report. It says:
Since taking office, Ministers have repeatedly stressed that a reduction in the volume of current expenditure by local government is central to the Government's overall economic strategy.
However, they have never explained why it should he so essential to their economic strategy. There has not been an explanation of why extra local government expenditure that is financed by rates should threaten our economic recovery, even were such an economic recovery on the horizon, and it manifestly is not. The picture that the Government like to present—of local authorities as wild overspenders—is true in only a minority of cases. Most local authorities are substantially more successful than central Government in controlling expenditure.
As the right hon. Member for Ardwick said, local government spending as a proportion of total public spending has fallen recently. Other research supports that view. For example, the Association of Metropolitan Authorities has drawn attention to research that compares the impact of central Government programmes with local government spending. One source is Cmnd. 8175 which examines the level of central and local government volume expenditure between 1975–76 and 1981–82. The information has been reproduced in index form. If central Government expenditure in 1975–76 is taken as an index of 100, it reached 108 in late 1981–82. Local government spending, if expressed as an index of 100 for 1975–76, dropped to an index of 80 by 1981–82.
The subject is approached from another angle by information that was presented to the Treasury and Civil Service Select Committee that examined local and central Government expenditure in cost terms between 1978–79 and 1982–83. It was also presented in index form. Central


Government spending, from an index of 100 in 1978–79 had reached 109·3 by 1982–83. However, local government spending, from an index of 100 in 1978–79 had fallen to 94·1 in 1982–83. There is other information that also shows that local authorities have been more successful in controlling expenditure than it is politically desirable for central Government to admit.
There is a low level of morale in local government, especially among its officers. The hon. Member for Stoke-on-Trent, Central made this point graphically. They feel battered and bruised. They are upset when services that they have spent a lifetime building up are now reduced before their eyes and are being undermined by central Government policy. They strongly resent the fact that they are being made the whipping boys of central Government. One local government officer told me recently that he felt that they had become the British Leyland of the 1980s—local government was to be blamed for everything that was wrong in Britain. That is a dangerous course.
I was struck by the conclusion that was published by the Environment Select Committee. It examined methods of financing local government and published its report in July. It recognised central Government's anxiety to control authority expenditure. The report said that the Committee
concludes that Government needs to devote more care and attention to the nature and extent of its controls than has been the case in recent years in order to secure greater consistency in its policies and the understanding and co-operation of the local authorities.
That is a fair assessment. My right hon. and hon. Friends and I will vote against the report because the Government are not pursuing that policy.

Mr. Michael Shersby: The right hon. Member for Manchester, Ardwick (Mr. Kaufman) made it quite clear that this was an important debate. I agree. He went to great lengths to castigate my right hon. Friend the Secretary of State for the Environment for producing the report. There are 272 Labour Members of Parliament. I can count only three of them sitting on the Opposition Front Bench.

Mr. Arthur Lewis: How many Tories are present?

Mr. Shersby: It seems that the right hon. Member for Ardwick is in a minority in believing that this is an important debate. I understood that he wished to debate the subject at length. It is clear that his right hon. and hon. Friends do not share that view. My colleagues and I are satisfied with the report. Many of us have other matters to attend to in our constituencies. For example, we have letters to write to constituents about the flagrant overspending by Labour-controlled councils. My hon. Friends are probably getting on with those duties. I do not know where all those other Labour Members are who apparently feel so angry about the report.
I am grateful for the opportunity that the debate on the supplementary report provides to pay tribute to the prudent administration of the local authority that has control in my constituency, Hillingdon borough council, which enjoys the full protection to which it is entitled as a result of the policies adopted and implemented by the controlling Conservative group over the past four and a half years. I know from the close relationship that I have with

Hillingdon Conservative councillors that it is only as a result of their determination to control and reduce public expenditure and to meet the targets set by my right hon. Friend that that record has been achieved.
It has not been an easy task. Indeed, it has been a hard slog. It has resulted in many of my friends who serve on the local authority spending many hours during many nights of the week pursuing the need for economies. The leader of the council, his colleagues and the chief officers have had to be, as my hon. Friend the Member for Reading, North (Mr. Durant) described, good managers. They have had to make sure about reducing expenditure in Hillingdon. They have succeeded in reducing it by about £10 million in the past four and a half years, which has been pretty good going.
That achievement has resulted in the local authority fulfilling the promises that it made to the electorate when it won control of the council four and half years ago in 1978. As a result, the Conservative council was re-elected with an increased majority in the elections that took place in May. The reason is clear. Hillingdon ratepayers know that the borough council, as distinct from the Socialist-controlled Greater London Council, is doing a good job in difficult times. They appreciate the way in which the council exercises strict financial control, which is reflected in full protection from selective grant reduction.
I was aware of the appreciation that was felt by local ratepayers when canvassing in May on behalf of my local Conservative candidates. If only Hillingdon ratepayers and other London ratepayers did not have to bear the massive rate burden that is imposed upon them by the Socialist-controlled Greater London Council, they would be relatively content. To add insult to injury, they have had to put up over the past week or so with the antics of Mr. Livingstone and his colleagues, who have been trying to dabble in national politics, in matters that are primarily the concern of Parliament rather than of a local authority that is supposed to be a strategic authority. I do not think that London ratepayers consider that it is the GLC's job to dabble in Northern Ireland affairs or other national political issues. That is Parliament's job, and it is no small wonder that the GLC is such an overspender.
To appreciate the full protection from selective grant reduction that is enjoyed by the Hillingdon borough council and other similar well-run authorities, we have only to consider the terrible situation faced by ratepayers in other London boroughs whose councils appear to have little or no regard for the exhortation to reduce public expenditure. It is a roll-call of profligate, high-spending Socialist authorities. It includes Camden and Lambeth, which is again, unhappily, under Labour control because of the defection of one Social Democratic Party member back to the Labour Party. Lewisham ratepayers have suffered a 40 per cent. rate increase. There has been a 55 per cent. rate increase in Brent. Likewise there has been a 40 per cent. increase in Hounslow. Also included are Newham and Waltham Forest. By comparison, Hillingdon's rate increase last year was 4½ per cent. That has also to be compared with 40 per cent. in the neighbouring borough of Hounslow.
Why is there such an enormous difference between local authorities that operate in similar areas and which do a similar job? We know that 70 per cent. of local government costs are wages, salaries and superannuation of local government staff. It is, therefore, revealing to compare the number of staff employed by some authorities


with the average number of staff for that type of authority. If we examine statistics for some inner London boroughs showing the number of full-time staff that they employed per thousand people for 1979–80, we see that the figure for the Labour-controlled Lambeth borough was 29·96 and for Tower Hamlets it was 29·73. Perhaps there are special reasons why the figure for Newham jumps up to 42·35, Haringey has 36·06 and Barking has 33·99. My own local authority of Hillingdon employs fewest, with a figure of 29·52. Why does Hillingdon require 29·52 staff per thousand to do the same job as Hammersmith, Islington, Newham or any other local authorities in London? The answer is clear. Well-run local authorities such as Hillingdon—I mention my own only by way of contrast—have a grip on the number of staff that they employ. They know that the more staff they employ, and the higher the authority's current expenditure, the less money there is available for capital projects.

Mr. Arthur Lewis: Much of what the hon. Gentleman has said is right. There is a similarity between Hillingdon and Newham in relation to immigration. Does he not agree that immigration creates problems? In Newham, we have one of the largest aged populations as well as many blind, sick and disabled people. We have given them a good service for years. They have floated in from all over the country and especially from the London area. We have, therefore, an enormous number of people requiring special attention and that accounts in part for some of the extra staff that Newham employs.

Mr. Shersby: The hon. Gentleman knows better than I that there are differences between boroughs such as Hillingdon and Newham. Nevertheless, he will agree that where similar local authorities are in similar areas and where there is a large difference between the number of full-time staff per thousand of the population employed, questions must be asked.
Rent arrears are another factor related to good management. Many of the local authorities that spend a large amount of ratepayers' money subsidising council tenants are also poor at collecting the rents that are due to them. In the table of rent arrears, we find that Islington is top of the list with 19·2 per cent. Lambeth comes a close second with 18 per cent., Camden has 17·1 per cent. and Brent has 16·5 per cent.
Hackney, which is an inner London local authority seems to do much better, with only 10·5 per cent. of rent arrears. It seems that Hackney, Haringey and Hammersmith, which are bottom of the 1980 table of rent arrears, operate more efficiently than Islington, Lambeth, Camden and Brent.
Another problem familiar to every hon. Member is empty council houses. Some of the authorities that I mentioned have the highest number of empty council houses. On 1 April 1980, several authorities had had more than 500 dwellings empty for more than 12 months. That is very serious, because there is always a grave housing shortage in London. In Manchester, there were 1,869 empty council houses on 1 April 1980. Islington had 1,401 empty houses. Knowsley, about which we heard earlier, had 1,400 empty houses, and the list continues. That shows bad management. The position could be improved. Empty houses do not bring in rent and the arrears that accumulate from other tenants contribute to the burden.
Another problem is subsidies to tenants. Councils have a discretion to subsidise the rent of council tenants and that

subsidy comes from the pockets of ratepayers and taxpayers. However, the amount of subsidy varies considerably. In London, Tower Hamlets and Camden are top of the list, with a subsidy of 39·1 per cent., and Hammersmith is bottom of the list with 18 per cent. In outer London, Waltham Forest subsidises its tenants by 24·3 per cent., but Barking, another Labour-controlled authority, has a subsidy of 15·4 per cent. There is an enormous fluctuation in the subsidies given by authorities, some of which are next door to each other. That fluctuation must be examined.
My local authority of Hillingdon operates a sensible rent policy and does not provide such an enormous subsidy to its tenants because it knows that the subsidy must come out of the pockets of people who may not be able to afford it. The local authorities who provide substantial subsidies should consider the problem, because there is an opportunity for improvement. I do not say that they should eliminate subsidies altogether—that is a local decision—but they should see whether they can make sensible savings.
Hillingdon authority is an education authority and my constituents are fortunate because their children's education is not provided by the Inner London Education Authority. I pity those who have the misfortune to live in inner London because of the massive expenditure by ILEA. That authority receives no block grant—that is appalling—and the fact is reflected in the rate demands of every inner London borough. I do not know what can be done about ILEA. I believe in high standards of education, as does every hon. Member, but it would seem that those who run ILEA have completely lost touch with the people of London. They have no concept of what is involved. Do they know what it means to an elderly person, whose income is just above the rate rebate level, to face the rate demands now being given to Londoners? Do they know what it means to the small firm struggling to keep its head above water in difficult circumstances to face the rate increases that have been inflicted in London during the past few years? Those who run ILEA should attend a course in business management so that they can understand the problems with which others must cope.
For my constituents and for just about everyone who lives in outer London, the GLC is the great bugbear. They must cope with a council that is led by a man who seems to be more concerned with national politics than with the proper running of a strategic London county authority. I note from the tables that I obtained this evening that the GLC receives partial protection from selective grant reduction. The reason for that is the effect of the budget introduced by the outgoing Conservative council, led by Sir Horace Cutler. We can say tonight that the GLC has partial protection, but I wonder what the next report will look like. I do not have much hope for the London ratepayers when they see the next selective grant reduction that the Secretary of State must make. The GLC does strange things. It has set up a number of police monitoring groups, one of which is in Hayes and Harlington, a constituency next to my own. That group receives a substantial grant from the Greater London Council to monitor what the police are doing. There is no need for that operation. The borough of Hillingdon has several elected representatives. It has three Greater London councillors and three Members of Parliament who represent the constituents situated within the borough of


Hillingdon. We do not need a police monitoring group to tell us what is going on. That is a job which the local authority can do if necessary.
Obviously the Home Secretary feels that it is a very good idea that there should be good liaison between the Home Office and local authorities. That is already available at virtually no additional cost. We also have a legal advice centre which has been reopened since the Labour Party regained control of the Greater London Council and which was shut down during the period that the Conservative Party controlled the Greater London Council. It is not necessary because my local authority, the borough of Hillingdon, provides a substantial grant to the citizens advice bureau to do that very job.
We now see the Greater London Council duplicating the position all over again. I have always been in favour of people being able to have access to good legal advice. I remember Mr. Peter Crowder, the former Member of Parliament for Ruislip-Northwood, whom many hon. Members will remember with affection, participating in a debate on this very matter when the then Labour GLC set up a similar centre. He made the point that everyone was entitled to get good legal advice, and I supported him.
In Hillingdon we are giving the cash to the citizens advice bureau to enable it to do the job. Once more, we have a duplication.
The GLC participates in strange activities. It gives support to rather odd organisations. Cash goes out in one direction or another. It makes one wonder what sort of councillors form the majority that serve on that local authority. They are a strange group of people led by a man who was not the leader of the Labour Party when the election took place, whom most people in London had never heard of, and who took over the leadership within a matter of hours of the Labour Party gaining control, thereby deposing Mr. Andrew McIntosh who led the Labour Party into the election. The problem with that section of the Labour Party is "Now you see them; now you don't".
The way in which local authorities are run, the massive expenditure in which they are involved, and the need for prudent financial control, to my mind raises an issue of overriding importance, and I shall try to persuade my right hon. Friend to listen to me for a few moments while I flog one of my particular hobby horses.
I have served in local government for 12 years, in Paddington and then in the new City of Westminster when the amalgamation took place following the implementa-tion of the Local Government Act. There were a number of leading business men on that local authority whose businesses were situated within the City of Westminster. Some came from Paddington, some from St. Marylebone and some from Westminster. I can remember one or two people who were senior partners in firms of one kind or another.
Local government in the City of Westminster is a complex business. It has an enormous budget, larger than the budget of many countries with which we have diplomatic relations and which we regard as sovereign States. The job of running those committees and of securing the respect of council officers and the electorate demands councillors of high calibre. We had them in those days. Westminster, perhaps peculiarly among the London boroughs—although the City of London can be counted

within the same category—is fortunate in that it does have elected to its membership quite a large number of people who have experience in various professions and various branches of industry and commerce. They can blend their experiences with those of many other people who come from other walks of life, thereby constituting a local authority capable of running its affairs properly. The borough of Hillingdon is in a fortunate position, because people with considerable business experience contribute massively to the running of that local authority.
I hope that I am not thought unduly critical if I say that there is a need to draw into local government many of the business men who, since the Labour Party abolished the business vote, have disappeared from local government. Many hon. Members support that view. Those business men no longer sit in the council chamber, and, with the help of the motor car and motorway, they live far away from the place where their business is conducted and play little or no part in local government.
I shall not enter into a controversy about why the business vote was abolished by the Labour Party. I agree that the original qualification for the business vote was not satisfactory. A person had to pay more than £10 a year in rates, which effectively meant that the people who came from the business community to serve in local government were, generally speaking, partners in firms of solicitors, estate agents and small business men. It was not easy for people who worked in large limited liability companies to serve in local government because they were not individual ratepayers.
Because of my interest and activity in this matter at the time, I managed to persuade the late Henry Brooke to change the law. One of the first measures that the Conservative Government enacted in 1970 was a change in the law so that any person could stand for the local authority in which his principal place of employment was situated.
That means that virtually anyone who works within a local authority area, even if they do not live there, can stand for election. It means that every business man in the London borough of Hillingdon can, if he wishes, stand for election to that local authority. That is better than nothing. These people pay enormous taxation in the form of rates, yet have no representation on local authorities.
I firmly believe that the time has come for Parliament to have another look at this matter. I should like to see about 10 per cent. of every local authority elected by a B roll of electors who represent the business community so that in every town hall at least 10 per cent. of the local authority would be business ratepayers who feel the burden of the rates charged by the local authority and who can make their contribution to the deliberations of the council.
After all, in the vast majority of cases, such people are as much part of the community as the residentially qualified councillors, even if they happen to live a few miles over the boundary. They spend most of their working life in a local authority area, and they ought to have a say in the way that local government is run. Perhaps even more important, they ought to be encouraged to contribute their business expertise to the affairs of our local authorities.
If we are to get away from the problems that bedevil local government today, if we are to manage it more efficiently in the way that hon. Members have described,


if we are to collect the rent arrears and if we are to re-examine the number of staff we employ per 1,000 of the population, we need the best possible councillors that we can get. I therefore urge my right hon. Friend to take account of this point and to deliberate on it. Reform is urgently necessary. If we do nothing else in local government, we must get the business men back into our town halls.
I have discussed this matter with the CBI, which I see from time to time. It complains about the rates and the effect they are having on its members' businesses. I have asked "Will you help by encouraging CBI members to encourage their employees to go into local government?" The CBI said "Yes, we shall", and it certainly does. From time to time, the CBI writes up the importance of doing so in its bulletin. That is not enough. Business men should either have to fill 10 per cent. of seats on the B roll of electors or they would remain vacant. If they remained vacant the local business men would not be able to complain that they were not being consulted and that they did not have the opportunity to play their part in the local authority.
I welcome the report. It is a realistic attempt to get public expenditure under control. I congratulate my right hon. and hon. Friends on their courage in dealing with it in the way that they have. I only hope that it will encourage those overspending authorities to put their houses in order. It can be done. Many of the local authorities mentioned in the report have done it. It is high time that the rest got on with the job.

Mr. William Wilson: My hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant) described himself as a humble member of a local authority. If he is a humble member, I hardly know where I come in the council hierarchy. He has managed to rise to the height of chairman of the education committee. After 24 years on the Warwickshire county council, I have never even reached the stage of being a vice-chairman. We have always been in a minority on the council. Once we had 16 out of 96 seats and on another occasion 10 out of 50.

The Minister for Local Government and Environmental Services (Mr. Tom King): There is plenty of time.

Mr. Wilson: There is plenty of time.
My hon. Friend the Member for Stoke-on-Trent, Central made another point that applies equally to the Warwickshire county council. It does not know what is going on. We spent the July meeting of the council in earnest discussion about how several million pounds were to be saved. We spent the next meeting of the council trying to work out how the two committees on which I serve would be able to make up their contribution to the savings. In November we were told that we did not have to make savings now because there was no need for them. It is difficult to understand how in a few months we could move from substantial anticipated cuts to being in balance.
Warwickshire county council has always been law abiding. When we were in office and the Government of the day were imposing cuts I criticised the then Minister at the Department of the Environment because, even after Warwickshire had made savings of several million

pounds, he still asked for more from us. The House should understand the price that has had to be paid by Warwickshire, a county without penalties under any order from any Government. Our departments are under-staffed. In the south of Warwickshire we have a purpose-built old people's home that is closed for lack of funds. In the north of Warwickshire we have a nursery unit that has never opened for exactly the same reason.
The House will gather from what I have said that Warwickshire has a Conservative-controlled council. The Conservatives are only just in control; they do not have an absolute majority. Having heard about how some councils are manipulated by their minorities, we, as a minority in Warwickshire, have something to learn.
Our councillors in Warwickshire are Conservatives. I often feel sorry for them, because I am sure that they want to provide for Warwickshire's elderly just as much as I do. They do not want the number of teachers in our schools to be cut any more than I do. However, they form the controlling party and are having to do such things. That is the result of the Government's policy. A council that is law abiding and careful with the economy is closing an old people's home and is unable to open a place for children that has been built but not even been furnished because of the lack of money.
There is no one else here to speak for the Tory councillors of Warwickshire, so I say that, given the way in which they have run Warwickshire's affairs, they deserve better from the Government.

Mr. Richard Alexander: I am glad to speak after the hon. Member for Coventry, South-East (Mr. Wilson), because it is appropriate to remind him that in August 1976 the Department of the Environment—then under a Labour Government—issued a circular to all local authorities saying:
The Government therefore ask local authorities to seek further savings in current expenditure during the remainder of 1976–77. For their part the Government intend to restrict the additional grant to be made available to local authorities … It is now proposed to set the forthcoming increase Order for 1976–77 at a level of £50 million below what it would otherwise have been.
It is reasonable to remind Opposition Members what happened under their stewardship when they castigate the Government for what they are doing.
I support the proposed selective holdback of grant from the gross overspenders among local authorities; the authorities that have consistently disregarded the Secretary of State's request for moderation in their current expenditure.
But under the proposed scheme Nottinghamshire is likely to experience a difficulty that has already been referred to by the hon. Member for Stoke-on-Trent, Central (Mr. Cant), although it may still have some validity. Nottinghamshire submitted a return to the Government in July, 1981 which showed that it proposed to spend £317 million, which was £8 million more than the revised grant-related expenditure assessment for 1931–82. The final accounts or 1981–82 show that the county council's expenditure was contained within the grant-related expenditure assessment level and the information about that was passed to my right hon. Friend the Secretary of State in September 1982. Although the council has managed to reduce its net expenditure to below the GREA


requirement, the present proposals would impose a temporary abatement of block grant on Nottinghamshire county council.
Under the proposal, the payment of block grant will fall to £165 million, which will in due course be revised upwards to £171 million because ultimately the council will be protected from grant abatement. However, because it may be up to a year before the figures are known for all councils, Nottinghamshire will suffer a loss of £6·4 million for the time being. I ask my right hon. Friend the Minister to look at that because the result will be a loss of revenue and interest charges, and we are properly urging local authorities to look at their expenditure. I shall be glad to hear what reassurance the Minister can give Nottinghamshire county council on that point.
The items most consistently in the postbags of Conservative Members in Nottinghamshire, and also apparently in the postbag of that rare Conservative Member for South Yorkshire, my hon. Friend the Member for Sheffield, Hallam (Mr. Osborn), are letters urging us to do something about the heavy expenditure by local authorities and the swingeing rate increases suffered year after year.
It was not surprising that the Opposition Benches were largely empty when my right hon. Friend the Secretary of State was making his strictures and saying that high-rating local authorities are crippling businesses. Such local authorities are putting small businesses out of business day after day and making them ask whether it is worth while carrying on. They are presiding over a huge loss of employment in the private sector.

Mr. Allen McKay: That point has been raised many times. How does the hon. Gentleman account for the fact that a firm in my locality is moving to Sheffield, which is a high-rated area, to obtain the best facilities, the room for expansion and the work force that it wants?

Mr. Alexander: I am delighted to hear what the hon. Gentleman has said. I should like to see Sheffield, which I know probably as well as he does, expand and take in new businesses. However, for every example that he can produce, there are examples, such as those my hon. Friend the Member for Hallam produced, of large and small businesses fleeing from Sheffield.
Hon. Members who represent high-rating local authorities will be the first to say that democracy is under attack as a result of what we are doing today. Much of the local authorities' income comes from people who have no vote. The local authorities can spend without responsibility. They can cripple businesses and Opposition Members will whine to the Prime Minister at Question Time asking what she will do to restore jobs in their constituencies.
My right hon. Friend the Secretary of State has done more to restore and preserve jobs in the private sector than anything the Labour Party would do if it came to power. The majority of Labour local authorities care little about private businesses and private employment. They tax and squeeze to pay their own swollen staff bills. [Interruption.]
I assure Opposition Members, who scoff in disbelief at what I have just said, that there are many small businesses and shops which are at the margins of profitability. They are sometimes even trading at a loss. They will be

watching the proposed rate demands of next spring with one object—to decide whether to stay in business or pack it all in, putting their staff out of work and swelling the unemployment figures. If they do, the Conservative Government will be blamed. But the blame will lie squarely on the local authorities that squeeze small businesses and impose swingeing rate increases next time.

Mr. Cant: rose—

M. Alexander: I am anxious to sit down to allow the right hon. Member for Widnes (Mr. Oakes) to reply for the Opposition.
I conclude by paying tribute to my right hon. Friend the Secretary of State for trying, throughout his period of office, to reverse the tide of profligacy and to keep businesses going in the Socialist republics that we have been discussing. It has been hard going for my right hon. Friend. However, measures such as the one before the House today are another example of my right hon. Friend's attempt to restore common sense at county and district level, to preserve private enterprise and to preserve the jobs that many Socialist councils seem anxious to destroy.

Mr. Gordon Oakes: Like my hon. Friend the Member for Coventry, South-East (Mr. Wilson), before coming to the House, I was a practising solicitor. Much of that practice I conducted in criminal courts. It is therefore apposite that I should be winding up the debate because the whole flavour of the report and the speech of the Secretary of State is that of a criminal court. The document before the House imposes probably the biggest fine—it amounts collectively on local government to £201 million—ever imposed in this country. Even the Secretary of State admits that this is not simply a withdrawal of grant. It is a penalty—and the penalty is a fine. The right hon. Gentleman has fined authorities collectively £201 million and individual authorities specific fines within that total.
My right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) has dealt more than adequately with the legality of what the Secretary of State has done. Paragraph 10 of the document states the issue clearly. Local authorities are being fined, for doing something that was perfectly legal at the time, by a Secretary of State sitting as a judge, who, when he did this, was himself acting illegally. There was need for an Act of Parliament, upon which my right hon. Friend the Member for Ardwick and myself served during its passage through the House, and which did not reach the statute book until the summer, to endorse the legal actions of the Secretary of State. It is tyranny, not justice, when that sort of thing happens.
I wish to talk about the wording of the judgment, if we are to use legal expressions. The hon. Member for Woolwich, East (Mr. Cartwright) has, like my right hon. Friend the Member for Ardwick, referred to the serious strictures of the Select Committee on Statutory Instruments. It is a most serious stricture when a Select Committee has to send for further documents to clarify a document before it and then castigates the Government for the wording of the document. Is not the wording of the document deliberate? It is said that clarity is the hand maiden of justice. Is not therefore obscurity the slave of injustice?
It suits the Government to present the House with a paper that is so obscure and confused it reads more like a


computer print-out than the sort of document that the House should be considering. Is it not inevitable—although I deplore the fact—that the Benches on both sides of the House have been fairly empty? Hon. Members looked at the document and could not understand it—hon. Members who understand local government could not understand it. I doubt whether Ministers could understand it without the guidance of their civil servants.
It is right for the Select Committee to say that not only should we, the treasurers and the councillors understand it, but the laymen, the ordinary public, should be able to understand clearly a document put before the House. This document is ludicrous, as my right hon. Friend for Ardwick pointed out when he quoted the various formulae in the document, in the degree to which it reveals in its own obscurity.
Let us take some of the double-speak words that are in the document and in the legislation, and which express the usual double-speak of the Department of the Environment. The word that dominates the document is "multipliers". Mathematically, anything that multiplies increases. The mathematical term in this document should be subtraction. It takes away, it does not multiply anything.
I wonder whether the Secretary of State will say to someone, "You have been a naughty boy, I shall bring the pliers out and use my multipliers on you." The Secretary of State has been using his multipliers on local authorities to bend them to his will, but not through any force of law. He imposes his will not only on authorities that have collectively overspent but on individual authorities that have spent more than he intended them to spend.
The other part of the document that I find quite amusing, in view of what went on in the Standing Committee on the Local Government Finance Bill, is where the Secretary of State is so kind as to take out of the figures damages that had to or will have to be paid by local authorities under the Riot (Damages) Act. In Committee we pointed out that nobody could forecast this kind of damage, and that the Secretary of State should therefore not lay down in an Act of Parliament incidents that may happen, but about which no one could know. This provision has come home to roost, as the Secretary of State has had to take those figures out.
Even more bizarre is the Secretary of State's removing from the figures the amount of money that has had to be spent by local authorities, particularly county councils, because of the severe and inclement weather during the early months of the year. It is ludicrous that the Secretary of State has to judge the clemency of the weather before deciding whether to impose penalties on a local authority, which is what he will have to do.
This year, as luck would have it, the weather was inclement throughout the whole country. Everybody suffered in the freeze. What will happen this winter when possibly Northumberland, Cumbria and Durham have bad weather, but the rest of the country does not? What will happen to the targets and the GREs of those counties? Are we dependent on the Secretary of State's judgment as to whether it was cold for the amount of money that a particular local authority has?
I hope that the Minister will take the opportunity to tell the House that the archaic Riot (Damages) Act, which is now 100 years old and was passed at a time of mental aberration by the House in responding to a local problem, shall be repealed. Proper steps must be taken for county councils—particularly for Liverpool, as the Secretary of

State knows—so that the ratepayers and the county councils are not penalised because of the riots that take place in their areas.
No one could suggest that those riots in Toxteth or Brixton were the result of police incompetence or that the place was not being properly policed. The riots were the result of other factors. It was not that the county council did not provide enough policemen—policemen were there in large numbers. However, under this archaic Act, the county council will have to reimburse for damage even in this age of insurance. So I hope that the Minister will say that the Government plan to do something about that Act, as the Association of County Councils has pressed him to do for some time.
One should consider this rate support grant report, its penalties and its fines, in the context of other things that the Secretary of State has said. Mr. Justice Heseltine, when he is not sitting in this court fining local authorities, also sits in another court next door, which for convenience I shall call the court of capital expenditure. He has said to local authorities in this court, "You have spent too much," but when he has the same defendants in the court next door he castigates them for not spending enough. He says, "You have not spent the grants and capital that are available to you. If you are good boys, and spend the money before the end of March next year, grants will be given to you." Of course, the local authorities, the defendants, say, "But, my Lord, there will be revenue consequences, and I shall have to appear before you in the other court and get into trouble for overspending."
The Secretary of State or one of his Ministers—I do not think that it was said in either this House or the other place—suggested that one of the ways in which local authorities could spend their capital moneys best, without revenue consequences, was on improvement grants for individual owner occupiers. That is one of the most heavily staff concentrated areas, one of the most revenue-intensive areas, because public money is being given to an individual. While the majority of people applying for such grants are honest, it is still public money. If public money is given to people for their own advantage—not lent, given—clearly, there must be scrupulous checks on the individual, the building and the purpose for which the money is spent. I cannot imagine a way that would have more revenue consequences for local authorities than trying to spend all the money, even if they could do so, before March.
To confuse the defendants even more, in the same court of capital expenditure, the Secretary of State made a statement and sent out a circular a few weeks ago, saying that local authorities can spend only 50 per cent. of their capital receipts. Thus, a prudent authority—the authority that Conservative Members praise to the skies for its wisdom and prudence—which saves money from capital receipts, instead of borrowing money for a project, now finds that it is not allowed to do that. I asked the right hon. Gentleman at Question Time last week what happens to the receipts that local authorities have accumulated so far. I am not talking about next year's receipts, the 1983 receipts. I am talking about money that they have in their possession on 1 April this year, money that they have saved this year and last year. Will it be subject to the 50 per cent. reduction? Local authorities do not know, and they want to know. The poor local authorities, between


two courts, find the Secretary of State, sitting as their judge, telling them to do different things at different times, sometimes even in the same court.
We have heard about individual applications of the fine to individual authorities. May I, as a Cheshire Member, point out to the Secretary of State that my authority has been fined more than any other authority, whether metropolitan, county, metropolitan district or shire county. We have been fined £11 million. I do not know whether the Secretary of State or his officials know Cheshire. It is an ordinary, workaday county. It does not have any exotic schemes in hand. It does not publish any of the odd magazines about which the hon. Member for Newark (Mr. Alexander) spoke. It tries to run proper and decent services, and to run them with the maximum economy. Nevertheless, Cheshire finds itself penalised to the tune of £11 million.
I spoke to the chief finance officer of Cheshire this morning and I echo the words of my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant) and the hon. Member for Newark. If this penalty were imposed, although it is doubtful whether it will be because it may be that when the audit comes next year Cheshire will be entitled to the money that is now being withheld from them—the Secretary of State smiles at that but we in the House are at the moment fining Cheshire £l1 million and whether that is returned to or not is subject to the Secretary of State's good will—the effect on Cheshire of an 8p increase in the precept, if the whole of it were to be borne by staff reduction as has been suggested, would be that a further 2,000 people would have to leave Cheshire county council's payroll.
Cheshire has been a model authority. It brought in private consultants to consider its staffing and as a result its manpower has decreased by more than 2,000 in the past two years. One would have thought that an authority doing all that would escape such penalties. However, if the whole of the burden were to fall on its manpower budget it would face a further reduction of 2,000 people.
When we talk about the reduction of manpower in local authorities, let us not forget that the people who work for local authorities are human beings like anybody else. When an authority reduces its manpower it is not the white collar workers who suffer most, but the cleaners, widows and single people living alone, and so on, who are wholly dependent on the authority for their living. They are the people who feel the axe rather than those in the higher reaches of the authority.
The other authority, which the Secretary of State might have mentioned in detail, although, to my astonishment, he did not, is that area for which he has special responsibility—Merseyside. The county of Merseyside has been fined £5·14 million. Liverpool, where, to his credit, the Secretary of State spends one day a week, has been fined £5·38 million. The Secretary of State should know better. The same Minister—the Minister for Merseyside, as he likes to be called—no matter how much money he says he will put into the area via the development corporation or other schemes that he has at his disposal, will fine Liverpool city council—not a Labour-controlled authority, I hasten to add—over £5 million for doing what it was elected to do. This is the economics of madness. The Secretary of State is saying not only that he has no faith in Liverpool city council but

no faith in those who elect Liverpool city council. He is saying that he will decide where the money goes and how it will be spent, not the elected representatives of the people.
The Secretary of State has probably heard a story that is circulating in the pubs and clubs of Liverpool, although I do not know whether the House has. It is said that one thing that the Secretary of State has achieved in Liverpool is the planting of 10,000 trees in the little more than a year that he has been there. That has been done to beautify the city. Can he spare the money for another thousand trees? Just another thousand trees—that is all we ask for. There would then be one living tree for every dead job created in Liverpool, not since the Government came to office but since the Secretary of State took on responsibility for Liverpool. That is the sum total of what is happening in Liverpool at present, yet as a penalty for their so-called overspending the Secretary of State has the audacity to take away from that hard-pressed city council and that hard-pressed county council over £10 million to which they were entitled. The right hon. Gentleman knows the problems of Merseyside and Liverpool. How can he say that that local authority was overspending?
The local authority of the hon. Member for Sheffield, Hallam (Mr. Osborn) has been fined £6·62 million. He seems to agree that his authority should be fined that sum. It was not clear from his speech what effect that would have on his beloved ratepayers, including the industrial ratepayers. Not only do Sheffield and other authorities suffer from the general reduction of the rate support grant, as my hon. Friend the Member for Stoke-on-Trent, Central said, but a further penalty is put on the hard-pressed ratepayers of Sheffield by the actions of the Secretary of State. That point did not seem to come across to the hon. Gentleman.
The hon. Gentleman should know, even if the Secretary of State does not, that that is the effect of democracy. The councillors in Sheffield were elected on a specific programme. They put that programme before the electors and were elected on it, so they have the same mandate to carry out their programme in Sheffield as has the Secretary of State to carry out what he said he would do in 1979. That is the fatal flaw in the argument about the penalties in the rate support grant. There is a complete denial of democracy for local authorities that are elected, just as we are, to do a job for our electors.
My hon. Friend the Member for Stoke-on-Trent, Central made an important point, as did the hon. Member for Newark, who spoke in mitigation of the £9,210,000 fine imposed on his county. Both my hon. Friend and the hon. Gentleman said that, in the interests of justice, if that money is returned to the counties concerned, it should be returned with interest. The Minister can play about with the weather and the Riot (Damages) Act, but I ask him to promise local authorities that if the money is paid back to them next year all the accumulated interest will be paid to them as well. They are lying out of that money. To use the criminal terms that I have been using, the fines were improperly imposed, so the interest on the fines should be paid to the authorities as well as the amount of the fines.
The hon. Member for Reading, North (Mr. Durant), whose authority has been fined £500,000, did a great disservice to the average councillor. Perhaps when he was a councillor he was the only one to raise such issues. However, hon. Members on both sides of the House know that that is not so in most local authorities, whether Labour


or Conservative controlled. Estimates are scrupulously examined by councillors. [Interruption.] The Secretary of State may laugh. Chairmen of finance committees of all political parties, not just Tory, go back time and again to ask the committees to prune their estimates. Of course they do. I have served in local government. I have been the chairman of a finance committee. I know what goes on, what has gone on and what continues to go on in local government. It is wrong to suggest that councillors of all political persuasions on the 100 councils that have been fined for profligacy and incompetence do not go into the accounts, try to save money and find cheaper schemes. Often they are at their wits' end to find cheaper schemes.

Mr. Durant: As the right hon. Gentleman has mentioned my contribution to the debate, I shall respond. Does he agree that one of the problems for local councillors is that they are not always aware of the full facts, particularly on the financial front—the borrowings, the use of the market and all the aspects that finance committees do not always consider? I was a councillor for some years. I am not saying that I was better than the right hon. Gentleman. I may have been a weaker councillor. I am not denying that. I was a councillor. My experience is that the information of councils is not as good as it should be. I was trying to make that point. I was not attacking councillors, but I was saying that if they had the facts they would be better at their jobs.

Mr. Oakes: The hon. Gentleman may be right about that. However, I say with some assurance that the information before councils and finance committees is very much better than the information that is before Marsham Street and the Secretary of State. As the hon. Member for Woolwich, East said, the effect of the report is to say that Marsham Street knows best and the local authority does not have sufficient information, or does not exercise proper control over expenditure. In fact, the authority knows much more about the problems that face it than any official in Marsham Street.
The hon. Member for Uxbridge (Mr. Shersby) talked about staff numbers and staffing variations between authorities. Of course there are variations. It would be absurd to suggest that there could be uniformity, or it would be simple for the Secretary of State to allocate a certain number of officers to every authority regardless of its size and problems. The hon. Gentleman presented an example that was the most absurd that one could imagine. He talked about the levels of rent arrears in different authorities. There is an enormous difference in the level of arrears. That is no reflection on the competence of individual authorities. Rent arrears depend on a number of factors. Strangely enough, the level of rent arrears is likely to be rather low in rich and well-heeled areas and in very poor areas. If an authority's population is very poor, most of the tenants will be making direct payment from the Department of Health and Social Security. Therefore, it will not have a high level of rent arrears.
Another factor is the stability of the population. Those who live in the same house for many years pay their rent. An authority that has many fly-by-night tenants who are here today and gone tomorrow, and who flit between authorities, will have a high level of

rent arrears. Arrears have nothing to do with the competence of the officers or the standard of a committee. There are bound to be variations between different authorities for reasons such as those I have described. Any housing officer or finance officer would tell the House precisely what I am saying.
The hon. Member for Uxbridge talked also about the GLC. I do not agree with everything that the GLC does. He said that in his area the GLC had reintroduced legal advice centres. He asked why it had done so and observed that the area had citizens advice bureaux. There is all the difference in the world between qualified lawyers in a legal advice centre giving advice to those who need it and the excellent work that is done by those in citizens advice bureaux, who often want desperately to send some of their clients to a legal advice centre because they are not competent lawyers and cannot give the advice that is needed. The hon. Gentleman gave a ludicrous example of how the GLC could save money. If the legal advice centres were closed, money would be saved, but that would be achieved at considerable expense to many individuals who cannot afford private legal advice and who desperately need advice, and need a centre to provide it.
My hon. Friend the Member for Coventry, South-East is a lawyer like myself, but he spoke, as did my hon. Friend the Member for Stoke-on-Trent, Central, as a defendant speaking in his own defence. My hon. Friend the Member for Coventry, South-East has a distinguished record on the Warwickshire country council as my hon Friend the Member for Stoke-on-Trent, Central has a distinguished record on the Staffordshire county council. I venture to say that there was more wit, sense, knowledge, experience and wisdom in every word that my hon. Friends uttered from their vast knowledge of local government affairs than anything that has emerged from Marsham Street or from the Secretary of State.
We are being asked to approve a report that manifestly is imposing penalties on local authorities which do not deserve them. The Secretary of State admitted in his opening speech that some of his figures are wrong. Instead of introducing yet another report, which he told the House he will have to do, he should put right the current report, which in itself is a No. 2 report. I suggest to the Secretary of State that he should withdraw the report and that we should wait until the day when he has his facts and figures right. He should remove all these penalties on local authorities. I ask my hon. Friends and Conservative Members who believe in justice and who despise tyranny to vote against the report.

The Minister for Local Government and Environmental Services (Mr. Tom King): We are debating the rate support grant supplementary report. The subject would, under the normal conventions of the House, be considered in one and a half hours, usually after 10 o'clock. The right hon. Member for Manchester, Ardwick (Mr. Kaufman) felt that the House needed longer to debate it. It is not for me to comment, but I have noticed that that view was not shared by all other hon. Members. Nevertheless, we always try to accommodate the Opposition in this matter. I am sure that the right hon. Gentleman will respect that. As the subject was fully debated during the proceedings on the Local Government


Finance Act 1982 and on previous announcements, I do not believe that the House should have needed to debate it so exhaustively again.
I listened to the speech of the right hon. Member for Widnes (Mr. Oakes), especially his closing words. Other hon. Members who were here will have heard phrases such as "fining Cheshire" and "tyranny". Apparently that is because its grant has been reduced arbitrarily by the Secretary of State. I am surprised that the right hon. Gentleman should have used those words. He received fair enough warning from my hon. Friend the Member for Newark (Mr. Alexander) who took the trouble to read from circular 84/76—"76" representing the year in which it was issued—that was issued by the Labour Government of which the right hon. Gentleman was a member. I do not wish to misinform the House, but I think that the right hon. Gentleman was a Minister in the Department of the Environment at that time. Nevertheless, he was a Minister.
I shall read one of the quotations to which my hon. Friend the Member for Newark referred:
For their part, the Government intend to restrict the additional grant to be made available to local authorities in the Rate Support Grant Increase Order".
This is an equivalent version.
It is now proposed to set the forthcoming Increase Order for 1976–77 at a level of £50 million below what it would otherwise have been".
That was because of a prospective overspend and the Labour Government's need to take action.
Tyranny? Fine? The right hon. Gentleman knows that the principle whether a Government are entitled to withdraw grant from local authorities is not at issue. The method may be at issue, but the principle has already been established by the Labour Government. Moreover, when that principle was established the right hon. Members for Ardwick and Widnes remained silent. They did not care to use such words as fine and tyranny. Presumably they then considered that this was a perfectly proper approach.
Some of my right hon. and hon. Friends may say that in principle it is proper to withhold grant if there has been excess expenditure but they would ask whether it is acceptable that that should be done in a crude and across-the-board way that hits both high-spending and low-spending authorities as was done by the Labour Government's circular 84/76.
We believe that it is unacceptable that authorities that have tried to observe economic patterns of expenditure and have tried to play their part in matching overall national targets of expenditure should be punished along with those which pay no regard to the needs for econony.
While the right hon. Members for Ardwick and Widnes are happy to say "punishment", they are happy to punish all alike. We believe that punishment should fall only where it is appropriate.
I shall briefly rehearse the background that has led to the supplementary report. When my right hon. Friend the Secretary of State and I came to the Department of the Environment and were first faced with the need to make economies in public expenditure and to urge economies in local government expenditure, we sought to pursue a voluntary approach. Each responsible local authority leader to whom we spoke emphasised and reaffirmed his belief—as he did to previous Governments—that local government had a proud record.
They said—the hon. Member for Coventry, South-East (Mr. Wilson) will remember the words—that local government has a proud record of accepting a responsibility to match the overall levels of national expenditure suggested by central Government, and not only accepted that responsibility but had a proud record of achieving it.
As my right hon. Friend the Secretary of State said earlier, such a record is easier to achieve—I do not say this sarcastically—at a time of increasing expenditure than when one is trying to achieve reductions. When we had to ask for economies, that voluntary spirit of co-operation could no longer achieve the results that we required.
Many right hon. and hon. Members will remember that the order that we are discussing now—whether to impose a holdback of grant—was our second choice. When my right hon. Friend the Secretary of State introduced the rate support grant at the meeting of the consultative council in December 1980, and when he put the problem of a prospective overspend and the need to achieve economies before the local authorities, he made it clear that the Government could not shirk their responsibilities to achieve those public expenditure levels. It was made clear that if local authority associations—local authorities acting collectively—could suggest a way in which those economies could be made without the need to move to a system of targets or alternative methods to make expenditure reductions we would welcome it.
We met again after Christmas on 23 January, after the rate support grants had been announced. The local authorities could not reply to that proposal. I do not criticise them for that, because they are not a holding company with many subsidiaries. They are separately elected members of an association of individual authorities. It was understandable that the association could not deliver an arrangement that would bind individual member authorities. They genuinely could not offer any proposals.
It was against that background that, having asked for the reduction, we converted them into targets for individual authorities, backed up with the proposals about grant reduction for those that could not match our targets.
This is almost a reunion meeting for the long-lost souls on the Local Government Finance Bill Committee. I feel sorry for the hon. Member for Stoke-on-Trent, Central (Mr. Cant) because we do not have a Bill for him this year. He may feel that this parliamentary Session is incomplete without such a Bill. He knows that the arguments about whether this legislation is retrospective were rehearsed endlessly. The House debated the matter on Second Reading, Report and Third Reading. Lords amendments were debated and we discussed the matter in Committee. The House gave its judgment that the specific proposals should go through, and it is under those powers that the report is laid before the House tonight.
I do not wish to weary the House with the endless arguments that took place, but we gave specific notice in December 1980, in a circular letter issued to the local authorities on 23 January, of the individual targets. That was the course of action that we proposed to take for the financial year 1981–82, which did not start until April. We passed further legislation in the Local Government Finance Act 1982. The proposals that are before the House today deal with the improvement in the method of deduction of grant where there is an overspend by local authorities.
The Labour Government introduced the procedure in 1976, but the old system was unfair because it imposed penalties across the board. During our first year in Government we had to use the same procedure, but we regretted the fact that we had no discretion to impose the penalties in a way that was fairer to the authorities that tried to economise.
When we were faced with a potential overspend of £800 million, we invited local authorities to revise their budgets and we then put before them our proposals for targets and holdback. The holdback proposals will mean a cut of about £201 million in 104 authorities. Some authorities will suffer the full effect of the holdback while others will obtain partial protection. We have exempted from holdback authorities whose expenditure is below what is deemed to be reasonable in the GREA. We have also exempted urban programme expenditure in partnership authorities, which I hope has the support of Labour Members.
We have exempted expenditure on civil disturbances. The right hon. Member for Ardwick asked about the Riot (Damages) Act 1886. The matter has been raised with my right hon. Friend the Home Secretary and a review is being conducted to see whether changes can be made. We have also exempted the exceptional emergency winter expenditure of 1981–82.
I am grateful for the understanding of the right hon. Member for Ardwick about my earlier problem. Both he and my hon. Friend the Member for Newark mentioned the fact that the holdback proposals are included in the revised budget. Some authorities that suffer holdback may be able to demonstrate on their outturn figures that the holdback should not apply to them. We have received only a handful of audited accounts for outturn expenditure for 1981–82, but we shall introduce another supplementary report as soon as possible if further changes are needed.

Mr. Kaufman: If the Minister understands my point, perhaps he will reply to the point made by the hon. Member for Newark (Mr. Alexander) and my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant). As some local authorities will not have been liable to holdback but will have been deprived of grant for some time, will they be recompensed for the interest that their money would otherwise have attracted?

Mr. King: Those moneys accrue from monthly or periodic payments during the year and would attract only limited interest. We do not propose to change the arrangements that were respected by both this Government and the Labour Government, when several payments and adjustments were made at different times. I have copies of the right hon. Gentleman's interim orders and supplementary orders in which adjustments were made between authorities. Interest was never paid and we shall not pay it now.

Mr. Oakes: The right hon. Gentleman and I are at cross purposes. He is talking about mistakes, but I am talking about penalties that have been imposed by the Government. Therefore, in those circumstances, interest ought to be paid.

Mr. King: The issue is that of adjustments to payments which are made in a number of cases. We do not propose to allow interest costs in this respect. We shall lay the supplementary reports when the outturn and the audited

accounts are available. This follows the current practice. If errors made by the previous Government come to light, and if errors are made in Government calculations, they are put right at the earliest opportunity, although interest is never paid. Although the right hon. Gentleman may be seeking to make a major issue of this point, I assure him that this is standard practice.
The background to this debate and the issue of the holdback of grant beg the question whether there is any justification for the Government to be concerned about economy in local government expenditure. The very basis upon which we started on this matter is the need to achieve reductions in local government expenditure.
I hope that I do not need to remind any of my hon. Friends why the Government thought it necessary when they came into office to seek to make economies in public expenditure, and economies in local government expenditure in particular. The Government were faced with an all-time record level of local government current expenditure, at a time when there was a rapid decline in capital expenditure. We asked local government—it could be said that the targets we set were unreasonable—for a reduction of 5·6 per cent. in real terms over three years.
I take on board what the hon. Member for Stoke-on-Trent, Central said about the difficulties of making economies. I have checked the fall in school rolls over the period for which we were asking for a reduction of 5·6 per cent. The fall in pupil numbers during that time was 6·5 per cent. over the country as a whole.
It is recognised that expenditure on education is by far the largest local government expenditure. It is not fair to expect an immediate pound-for-pound, pound-for-pupil reduction. The Government have never asked for absolute equivalence in that respect. When one looks at the background of what we were seeking to achieve in economies in local government expenditure—I think it is fair to expect some economies on the education side in recognition of the fall in pupil numbers—it is not reasonable to suggest that savage cuts were involved in every possible direction.
My hon. Friend the Member for Uxbridge (Mr. Shersby), in a well-delivered speech, drew attention to the problem of ILEA. My hon. Friend the Member for Reading, North (Mr. Durant) drew attention to the need for councillors to be better informed and the need for proper information.
Recently, my right hon. Friend and I met the leaders of the London Labour boroughs, who were accompanied by the Labour leader of the GLC and the deputy leader of ILEA. When I asked the deputy leader of ILEA what had happened to pupil numbers over the period which he was criticising so deeply, I was shocked to discover that he did not know the figure. I gave it to him. The figure was 20 per cent. There will be an estimated fall of 20 per cent. in the pupil numbers in ILEA. We were talking against the background of the five-year period.
Against that background, it is difficult to tolerate the year-on-year expenditure increases and the burdens that have been borne by people in the inner London boroughs, given the problems that they face. I am prepared to listen to those who are prepared to justify the reasons for increased expenditure and the reasons why such increases are necessary. However, it is intolerable if such people are not even aware of the facts about the authorities for which they are responsible.
My hon. Friend the Member for Reading, North spoke far too modestly of his own experiences in local government. I am aware of the close interest that my hon. Friend the Member for Uxbridge takes in the London borough of Hillingdon, and I am aware of the determined effort made by councillors there to achieve results. However, those results are sometimes frustrated by certain Labour and Liberal councillors who seem to be working in the opposite direction.
The Opposition claim that any reduction in expenditure means cuts. The answer to that charge has been given by the newly elected Conservative council in Birmingham. Its council employees have said that, given the crunch, that local authority can provide the same service as previously with a one-third reduction in costs—£3·5 million a year—and about 250 fewer people.
My hon. Friend the Member for Uxbridge took us into slightly different country. Although I warmly support the need for better informed councillors and the need to attract into local government councillors of the highest quality, I do not think that my hon. Friend's methods, such as the business vote, are Government policy. In saying that, I in no way mock the seriousness of the issue that he raised.
Anyone who cares about local government and who has any understanding of the problems of the industry in the city represented by my hon. Friend the Member for Sheffield, Hallam (Mr. Osborn) can only weep at the problems. Those problems are caused not by rates, but by the current industrial situation and a world steel crisis. At such a time, any company would be looking for some understanding and recognition from a local authority of the problems that it faces, and local authorities should be determined to do what they can to help.
I remember speaking to the Sheffield chamber of commerce, which has been fighting to save the industries that have played such a vital part in the growth of that city. I did so on a day when it heard that the rate increase for the following year would be 40 per cent. It is a disgrace for some hon. Members to suggest that rates do not matter to industry. That does the grossest disservice to jobs and employment. Rates are not allowable for exports. They are not rebateable. They fall directly on the export costs of industry. No hon. Member should fail to understand that fact.

Mr. John H. Osborn: The figure over the past few years is 142 per cent. Does my hon. Friend recall that he has had many letters from people who wrote to me in desperation and expected me, as the only Conservative Member in Sheffield and South Yorkshire, to do something about it? Any hope that my right hon. Friend can give them will be welcome.

Mr. King: No one could have done more than my hon. Friend to bring to my attention and that of my colleagues the appalling problems faced by many ratepayers in Sheffield. I well understand the problems that are being caused. The tragedy and the disgrace is that this is not a matter of cuts. It is not that authorities have been put in an intolerable position by economies that we are asking them to make, but authorities are specifically increasing expenditure in a deliberate, provocative and intolerable way. It imposes real problems on my hon. Friend and his constituents.
Many right hon. and hon. Members have joined us now. I am grateful for the best audience by about a factor of 20 attracted to the debate today. The right hon. Member for Ardwick insisted on having the debate. It has not grabbed the attention of the House in a way that we might all have sought. The issues have already been fully debated. They were dealt with in one Act and passed through an exhaustive procedure. The right hon. Gentleman lost then. He said nothing new tonight. He merely rehearsed all the old arguments.
Three main points could have been raised. First, the argument about the principle of holdback crumbles away when it is discovered, unfortunately, that we keep records of Labour Government circulars in the Department. It is a surprising fact that someone still keeps them somewhere. The Labour Government followed exactly the same principle as we have followed in this case. It will be alleged that the procedure we have followed is unfair. The unfairness is to hold back grant across the board and to make no attempt to protect those who have sought to follow the targets and to deal unfairly with those who have sought to be prudent. It has been suggested that the measures are retrospective. We have dealt with that suggestion exhaustively. With the clearest warning being given well before any suggestion of grant holdback was imposed, no authority was in any doubt well before the event of the action that it needed to take to avoid penalty.

Mr. Kaufman: The Minister says that the measure is not retrospective. Will he therefore explain why he was unable to present this report until section 8 of the Local Government Finance Act 1982 made this report a lawful report and made it so retrospectively, which it was not before the Act was passed?

Mr. King: The right hon. Member for Ardwick seems to be under the impression—his right hon. Friend the Member for Widnes made the same mistake—that the penalties and the power to impose penalties are retrospective and that multipliers are malign. The opposite is the case. The power to remove grant existed previously. We sought to improve the basis for the power to give protection to those authorities which sought to observe the guidelines. The multipliers are entirely benign and are used to help authorities. The right hon. Gentleman will find, if he examines the report, that all there which lose grants have a multiplier of one—meaning that there is no change whatsoever. Those which are helped have a multiplier of less than one.
The right hon. Gentleman has tried to attack us by saying that we are a threat to local government. The threat to local government comes from those who are trampling over democracy in this country. It comes from those who try to gain control of a council by smashing a councillor's windows and burning his car to make him stay away from a council meeting. If Labour right hon. and hon. Members did more to comdemn that sort of behaviour in local government, we would have more respect for their other views. I commend the report to the House as a sensible measure to protect those who seek to observe the traditions of local government and not one to protect those who are determined to trample on their ratepayers and electors.

Question put:—

The House divided: Ayes 289, Noes, 239.

Division No. 31]
[10 p.m.


AYES






Adley, Robert



Aitken, Jonathan
Farr, John


Alexander, Richard
Fell, Sir Anthony


Alison, Rt Hon Michael
Fenner, Mrs Peggy


Amery, Rt Hon Julian
Finsberg, Geoffrey


Ancram, Michael
Fisher, Sir Nigel


Arnold, Tom
Fletcher, A. (Ed'nb'gh N)


Aspinwall, Jack
Fletcher-Cooke, Sir Charles


Atkins, Rt Hon H. (S'thorne)
Fookes, Miss Janet


Atkins, Robert (Preston N)
Forman, Nigel


Atkinson, David (B'm'th,E)
Fox, Marcus


Baker, Kenneth (St.M'bone)
Fraser, Rt Hon Sir Hugh


Baker, Nicholas (N Dorset)
Fraser, Peter (South Angus)


Banks, Robert
Fry, Peter


Beaumont-Dark, Anthony
Gardiner, George (Reigate)


Bendall, Vivian
Gardner, Edward (S Fylde)


Benyon, Thomas (A'don)
Garel-Jones, Tristan


Benyon, W. (Buckingham)
Gilmour, Rt Hon Sir Ian


Berry, Hon Anthony
Glyn, Dr Alan


Best, Keith
Goodhart, Sir Philip


Bevan, David Gilroy
Goodhew, Sir Victor


Biffen, Rt Hon John
Goodlad, Alastair


Biggs-Davison, Sir John
Gorst, John


Blackburn, John
Gow, Ian


Blaker, Peter
Gower, Sir Raymond


Body, Richard
Grant, Anthony (Harrow C)


Bonsor, Sir Nicholas
Gray, Rt Hon Hamish


Bottomley, Peter (W'wich W)
Greenway, Harry


Bowden, Andrew
Grieve, Percy


Boyson, Dr Rhodes
Griffiths, E. (B'y St. Edm'ds)


Braine, Sir Bernard
Griffiths, Peter Portsm'th N)


Bright, Graham
Grist, Ian


Brinton, Tim
Grylls, Michael


Brittan, Rt. Hon. Leon
Gummer, John Selwyn


Brooke, Hon Peter
Hamilton, Hon A.


Brotherton, Michael
Hamilton, Michael (Salisbury)


Brown, Michael (Brigg &amp; Sc'n)
Hampson, Dr Keith


Browne, John (Winchester)
Hannam, John


Bruce-Gardyne, John
Haselhurst, Alan


Buchanan-Smith, Rt. Hon. A.
Havers, Rt Hon Sir Michael


Buck, Antony
Hawkins, Sir Paul


Budgen, Nick
Hayhoe, Barney


Bulmer, Esmond
Heddle, John


Burden, Sir Frederick
Henderson, Barry


Butcher, John
Heseltine, Rt Hon Michael


Carlisle, John (Luton West)
Hicks, Robert


Carlisle, Kenneth (Lincoln)
Higgins, Rt Hon Terence L.


Carlisle, Rt Hon M. (R'c'n)
Hogg, Hon Douglas (Gr'th'm)


Chalker, Mrs. Lynda
Holland, Philip (Carlton)


Channon, Rt. Hon. Paul
Hooson, Tom


Chapman, Sydney
Hordern, Peter


Churchill, W. S.
Howe, Rt Hon Sir Geoffrey


Clark, Hon A. (Plym'th, S'n)
Howell, Rt Hon D. (G'ldf'd)


Clark, Sir W. (Croydon S)
Howell, Ralph (N Norfolk)


Clarke, Kenneth (Rushcliffe)
Hunt, John (Ravensbourne)


Clegg, Sir Walter
Hurd, Rt Hon Douglas


Cockeram, Eric
Irvine, Rt Hon Bryant Godman


Colvin, Michael
Irving, Charles (Cheltenham)


Cope, John
Jenkin, Rt Hon Patrick


Cormack, Patrick
Jessel, Toby


Corrie, John
Johnson Smith, Sir Geoffrey


Costain, Sir Albert
Jopling, Rt Hon Michael


Cranborne, Viscount
Kaberry, Sir Donald


Critchley, Julian
Kershaw, Sir Anthony


Crouch, David
Kilfedder, James A.


Dickens, Geoffrey
King, Rt Hon Tom


Dorrell, Stephen
Knight, Mrs Jill


Douglas-Hamilton, Lord J.
Knox, David


Dover, Denshore
Lamont, Norman


Dunn, Robert (Dartford)
Lang, Ian


Durant, Tony
Latham, Michael


Eden, Rt Hon Sir John
Lawrence, Ivan


Edwards, Rt Hon N. (P'broke)
Lawson, Rt Hon Nigel


Eggar, Tim
Lee, John


Elliott, Sir William
Le Marchant, Spencer


Emery, Sir Peter
Lennox-Boyd, Hon Mark


Eyre, Reginald
Lester, Jim (Beeston)


Fairbairn, Nicholas
Lewis, Kenneth (Rutland)


Fairgrieve, Sir Russell
Lloyd, Ian (Havant &amp; W'loo)


Faith, Mrs Sheila
Lloyd, Peter (Fareham)





Loveridge, John
Rost, Peter


Luce, Richard
Royle, Sir Anthony


McCrindle, Robert
Rumbold, Mrs A. C R.


MacGregor, John
Sainsbury, Hon Timothy


MacKay, John (Argyll)
Shaw, Giles (Pudsey)


Macmillan, Rt Hon M.
Shaw, Sir Michael (Scarb')


McNair-Wilson, M. (N'bury)
Shelton, William (Streatham)


McNair-Wilson, P. (New F'st)
Shepherd, Colin (Hereford)


Madel, David
Shepherd, Richard


Major, John
Shersby, Michael


Marland, Paul
Silvester, Fred


Marlow, Antony
Sims, Roger


Marten, Rt Hon Neil
Skeet, T. H. H.


Mates, Michael
Smith, Dudley


Mather, Carol
Smith, Tim (Beaconsfield)


Maude, Rt Hon Sir Angus
Speed, Keith


Mawby, Ray
Speller, Tony


Mawhinney, Dr Brian
Spence, John


Maxwell-Hyslop, Robin
Spicer, Michael (S Worcs)


Mayhew, Patrick
Sproat, Iain


Mellor, David
Squire, Robin


Meyer, Sir Anthony
Stainton, Keith


Mills, Iain (Meriden)
Stanbrook, Ivor


Mills, Sir Peter (West Devon)
Stanley, John


Moate, Roger
Steen, Anthony


Monro, Sir Hector
Stevens, Martin


Montgomery, Fergus
Stewart, A. (E Renfrewshire)


Moore, John
Stewart, Ian (Hitchin)


Morgan, Geraint
Stokes, John


Morris, M. (N'hampton S)
Stradling Thomas, J.


Morrison, Hon C. (Devizes)
Tapsell, Peter


Morrison, Hon P. (Chester)
Taylor, Teddy (S'end E)


Mudd, David
Temple-Morris, Peter


Murphy, Christopher
Thomas, Rt Hon Peter


Myles, David
Thompson, Donald


Neale, Gerrard
Thorne, Neil (Ilford South)


Needham, Richard
Thornton, Malcolm


Nelson, Anthony
Townend, John (Bridlington)


Neubert, Michael
Townsend, Cyril D, (B'heath)


Onslow, Cranley
Trippier, David


Osborn, John
Trotter, Neville


Page, John (Harrow, West)
van Straubenzee, Sir W.


Page, Richard (SW Herts)
Vaughan, Dr Gerard


Parris, Matthew
Viggers, Peter


Patten, Christopher (Bath)
Waddington, David


Patten, John (Oxford)
Wakeham, John


Pattie, Geoffrey
Waldegrave, Hon William


Pawsey, James
Walker-Smith, Rt Hon Sir D.


Percival, Sir Ian
Wall, Sir Patrick


Peyton, Rt Hon John
Waller, Gary


Pink, R. Bonner
Walters, Dennis


Pollock, Alexander
Ward, John


Porter, Barry
Warren, Kenneth


Prentice, Rt Hon Reg
Watson, John


Price, Sir David (Eastleigh)
Wells, Bowen


Proctor, K. Harvey
Wells, John (Maidstone)


Pym, Rt Hon Francis
Whitney, Raymond


Raison, Rt Hon Timothy
Wickenden, Keith


Rathbone, Tim
Wilkinson, John


Rees, Peter (Dover and Deal)
Williams, D. (Montgomery)


Rees-Davies, W. R.
Winterton, Nicholas


Renton, Tim
Young, Sir George (Acton)


Rhodes James, Robert
Younger, Rt Hon George


Ridsdale, Sir Julian



Rippon, Rt Hon Geoffrey
Tellers for the Ayes:


Roberts, M. (Cardiff NW)
Mr. Robert Boscawen and


Roberts, Wyn (Conway)
Mr. David Hunt.


Rossi, Hugh



NOES


Abse, Leo
Barnett, Guy (Greenwich)


Adams, Allen
Barnett, Rt Hon Joel (H'wd)


Allaun, Frank
Beith, A. J.


Alton, David
Benn, Rt Hon Tony


Anderson, Donald
Bennett, Andrew (St'kp't N)


Archer, Rt Hon Peter
Bidwell, Sydney


Ashley, Rt Hon Jack
Booth, Rt Hon Albert


Ashton, Joe
Boothroyd, Miss Betty


Atkinson, N. (H'gey,)
Bottomley, Rt Hon A. (M'b'ro)


Bagier, Gordon A.T.
Bray, Dr Jeremy






Brocklebank-Fowler, C.
Holland, S. (L'b'th, Vauxh'll)


Brown, Hugh D. (Provan)
Home Robertson, John


Brown, R. C. (N'castle W)
Homewood, William


Brown, Ronald W. (H'ckn'y S)
Hooley, Frank


Brown, Ron (E'burgh, Leith)
Howell, Rt Hon D.


Buchan, Norman
Howells, Geraint


Callaghan, Rt Hon J.
Hoyle, Douglas


Callaghan, Jim (Midd't'n &amp; P)
Hughes, Mark (Durham)


Campbell, Ian
Hughes, Robert (Aberdeen N)


Campbell-Savours, Dale
Hughes, Roy (Newport)


Canavan, Dennis
Janner, Hon Greville


Cant, R. B.
Jay, Rt Hon Douglas


Carmichael, Neil
John, Brynmor


Carter-Jones, Lewis
Johnson, James (Hull West)


Cartwright, John
Johnson, Walter (Derby S)


Clark, Dr David (S Shields)
Johnston, Russell (Inverness)


Clarke, Thomas (C'b'dge, A'rie)
Jones, Rt Hon Alec (Rh'dda)


Cocks, Rt Hon M. (B'stol S)
Jones, Barry (East Flint)


Cohen, Stanley
Kaufman, Rt Hon Gerald


Coleman, Donald
Kilroy-Silk, Robert


Concannon, Rt Hon J. D.
Lambie, David


Conlan, Bernard
Leadbitter, Ted


Cook, Robin F.
Leighton, Ronald


Cowans, Harry
Lestor, Miss Joan


Cox, T. (W'dsw'th, Toot'g)
Lewis, Arthur (N'ham NW)


Craigen, J. M. (G'gow, M'hill)
Lewis, Ron (Carlisle)


Crawshaw, Richard
Lofthouse, Geoffrey


Crowther, Stan
Mabon, Rt Hon Dr J. Dickson


Cryer, Bob
McCartney, Hugh


Cunliffe, Lawrence
McDonald, Dr Oonagh


Cunningham, G. (Islington S)
McElhone, Mrs Helen


Cunningham, Dr J. (W'h'n)
McGuire, Michael (Ince)


Dalyell, Tam
McKay, Allen (Penistone)


Davidson, Arthur
McKelvey, William


Davies, Rt Hon Denzil (L'lli)
MacKenzie, Rt Hon Gregor


Davis, Terry (B'ham, Stechf'd)
McNamara, Kevin


Deakins, Eric
McTaggart, Robert


Dean, Joseph (Leeds West)
McWilliam, John


Dewar, Donald
Magee, Bryan


Dixon, Donald
Marks, Kenneth


Dobson, Frank
Marshall, D (G'gow S'ton)


Dormand, Jack
Marshall, Jim (Leicester S)


Douglas, Dick
Martin, M (G'gow S'burn)


Dubs, Alfred
Mason, Rt Hon Roy


Duffy, A. E. P.
Maxton, John


Dunwoody, Hon Mrs G.
Maynard, Miss Joan


Eastham, Ken
Meacher, Michael


Edwards, R. (W'hampt'n S E)
Mikardo, Ian


Ellis, R. (NE D'bysh're)
Millan, Rt Hon Bruce


Ellis, Tom (Wrexham)
Miller, Dr M. S. (E Kilbride)


English, Michael
Mitchell, Austin (Grimsby)


Ennals, Rt Hon David
Mitchell, R. C. (Soton Itchen)


Evans, Ioan (Aberdare)
Morris, Rt Hon A. (W'shawe)


Evans, John (Newton)
Morris, Rt Hon C. (O'shaw)


Ewing, Harry
Morris, Rt Hon J. (Aberavon)


Faulds, Andrew
Moyle, Rt Hon Roland


Field, Frank
Mulley, Rt Hon Frederick


Flannery, Martin
Newens, Stanley


Foot, Rt Hon Michael
Oakes, Rt Hon Gordon


Ford, Ben
O'Halloran, Michael


Forrester, John
O'Neill, Martin


Foster, Derek
Orme, Rt Hon Stanley


Foulkes, George
Owen, Rt Hon Dr David


Fraser, J. (Lamb'th, N'w'd)
Palmer, Arthur


Freeson, Rt Hon Reginald
Park, George


Garrett, John (Norwich S)
Parker, John


George, Bruce
Parry, Robert


Gilbert, Rt Hon Dr John
Pendry, Tom


Golding, John
Penhaligon, David


Graham, Ted
Powell, Raymond (Ogmore)


Grant, John (Islington C)
Prescott, John


Hamilton, James (Bothwell)
Price, C. (Lewisham W)


Hamilton, W. W. (C'tral Fife)
Race, Reg


Hardy, Peter
Radice, Giles


Harman, Harriet (Peckham)
Rees, Rt Hon M (Leeds S)


Harrison, Rt Hon Walter
Richardson, Jo


Hart, Rt Hon Dame Judith
Roberts, Albert (Normanton)


Healey, Rt Hon Denis
Roberts, Allan (Bootle)


Heffer, Eric S.
Roberts, Ernest (Hackney N)


Hogg, N. (E Dunb't'nshire)
Roberts, Gwilym (Cannock)





Robertson, George
Thomas, Dr R.(Carmarthen)


Robinson, G. (Coventry NW)
Thorne, Stan (Preston South)


Rooker, J. W.
Tilley, John


Roper, John
Tinn, James


Ross, Ernest (Dundee West)
Torney, Tom


Ross, Stephen (Isle of Wight)
Urwin, Rt Hon Tom


Rowlands, Ted
Varley, Rt Hon Eric G.


Ryman, John
Walker, Rt Hon H. (D'caster)


Sandelson, Neville
Warden, Gareth


Sever, John
Watkins, David


Sheerman, Barry
Weetch, Ken


Sheldon, Rt Hon R.
Wellbeloved, James


Short, Mrs Renée
Welsh, Michael


Silkin, Rt Hon J. (Deptford)
White, Frank R.


Silkin, Rt Hon S. C. (Dulwich)
White, J. (G'gow Pollok)


Silverman Julius
Whitehead, Phillip


Skinner, Dennis
Whitlock, William


Smith, Rt Hon J. (N Lanark)
Willey, Rt Hon Frederick


Snape, Peter
Williams, Rt Hon A. (S'sea W)


Soley, Clive
Williams, Rt Hon Mrs (Crosby)


Spearing, Nigel
Wilson, Rt Hon Sir H. (H'ton)


Spellar, John Francis (B'ham)
Wilson, William (C'try SE)


Spriggs, Leslie
Winnick, David


Stallard, A. W.
Woodall, Alec


Steel, Rt Hon David
Woolmer, Kenneth


Stoddart, David
Wright, Sheila


Stott, Roger
Young, David (Bolton E)


Strang, Gavin



Straw, Jack
Tellers for the Noes:


Summerskill, Hon Dr Shirley
Mr. George Morton and


Taylor, Mrs Ann (Bolton W)
Mr. Frank Haynes.


Thomas, Dafydd (Merioneth)

Question accordingly agreed to.

Resolved,
That the Rate Support Grant Supplementary Report (England) (No. 2) 1982, a copy of which was laid before this House on 28th July, in the last Session of Parliament, be approved.

British National Oil Corporation

The Minister of State, Department of Energy (Mr. Hamish Gray): I beg to move,
That the draft British National Oil Corporation (Borrowing Powers) Order 1982, which was laid before this House on 9th December, be approved.
The purpose of statutory borrowing limits is to secure the proper parliamentary control of the corporation's borrowing. It may be helpful if I first outline and explain the legislation under which this draft order has been laid. Limits to BNOC's borrowing are set by section 6 of the Petroleum and Submarine Pipe-lines Act 1975. In this Act, BNOC's borrowing was restricted to £600 million. There was provision, however, for the limit to be increased to £900 million by order, subject to affirmative resolution by this House.
As hon. Members will recall, section 7 of the Oil and Gas (Enterprise) Act amends section 6 of the 1975 Act. It extends the definition of items counting against the borrowing limit, it reduces the upper borrowing limit to £800 million, and, more important, it provides that the borrowing limits may be reduced following the disposal of a wholly-owned subsidiary of the corporation. This provision is in new subsection 6(10) of the Petroleum and Submarine Pipe-lines Act.
To reduce the corporation's borrowing limits, the Secretary of State has to make an order. Section 46(2) of the 1975 Act, which was also amended by the 1982 Act and under which this order is laid, requires that the order be approved in draft by the House. The amendments to sections 6 and 46 came into force on 1 November.
The corporation's present statutory borrowing limit of £600 million was suitable for a corporation involved in oil exploration and production as well as oil trading. BNOC's exploration and production business was transferred to Britoil on 1 August this year. Britoil ceased to be a wholly-owned subsidiary of the corporation on 1 November, when the Secretary of State took over the shares. The result of this is that Britoil's debts are no longer counted in BNOC's borrowings.
A lower statutory borrowing limit, reflecting the change in BNOC's business and requirements for capital, is therefore needed if we are to secure the proper parliamentary control over BNOC's borrowing. A sum of £600 million is clearly too high for an organisation concerned only with oil trading and related activities.
This order therefore lowers the maximum amount that the corporation may borrow from the present £600 million to £100 million. It also lowers the figure to which that maximum amount may be increased by a further order, from £800 million to £150 million. Such an order would also require approval in draft by this House. Any increase beyond £150 million would require new legislation.
The initial limit needs to be sufficient to cover any mismatches that might occur betweeen the corporation's receipts and payments for cargoes of oil. It also needs to cover the situation where the corporation might have to hold and store oil temporarily.
In general, BNOC aims to trade on a back-to-back basis. The corporation would expect to receive payment from a customer for delivery of a cargo of oil at the same time as it paid the supplier of the cargo. In such circumstances, no borrowing would be necessary, but inevitably the corporation will need overdrafts, or other short-term borrowing, to cover occasional late payments, or other mismatches between payments and receipts, such as bank error. None of this is within the corporation's control. A single large cargo could be worth about £20 million. Exceptionally, with tankers capable of carrying 300,000 tonnes of crude, this could be up to £46 million. BNOC's experience is that late payments are uncommon, but they are an inevitable feature of the business. The borrowing limit must be sufficient to cover them.
While the corporation would not, in general, expect to have to store oil, circumstances may sometimes arise where that cannot be avoided. BNOC's availabilities under participation depend on the day-to-day performance of the North Sea fields, which cannot be exactly predicted, but it disposes of the oil under contracts which are generally of annual duration and where day-to-day flexibility is limited. BNOC might need to store oil temporarily to create the necessary day-to-day match or while it was organising another outlet. One hundred million pounds would cover several large cargoes and provide an adequate margin of safety. The corporation agrees that the limit is sensible. It is not excessive for a trading organisation with a turnover of over £7,000 million per annum.
The gap between upper and lower statutory borrowing limits is to allow time, should the lower limit be exceeded, to prepare legislation necessary to increase the upper limit. We consider that a gap of £50 million is sufficient for that purpose.

Mr. Dick Douglas: Does the Minister concede that at this time he should take a view of what is happening in the international oil market? Will he say what is likely to happen at the December meeting of

OPEC? What does he think is likely to happen in the spot market? Where will BNOC store this oil? What provision is he making in that regard?

Mr. Gray: I shall deal with those matters as I proceed. The hon. Gentleman will have an opportunity to comment in due course.
The new borrowing limits should come into operation on 31 December. That is the date on which the corporation's new financial structure is to be established. It may help hon. Members in considering the draft order if I now put it in the broader context of the corporation's new financial structure.
BNOC's trading business has functioned successfully and, to a large extent, separately from the upstream business which was transferred to Britoil. We see no reason why it should not continue to function successully.
The corporation will continue to operate in accordance with guidelines agreed with Government from lime to time, setting out the functions which—in addition to handling participation oil, its main activity—we consider appropriate for its trading role. Those will include, for example, trading in royalty oil and managing the Government's pipeline and storage system. Although participation agreements provide for oil companies to be paid market prices, there will remain scope for profit-making through, for example, shipping deals and third-party trading.
If the corporation makes significant profits, we have the power under section 5 of the Oil and Gas (Enterprise) Act to require the corporation to pay to the Secretary of State sums surplus to its requirements. This would be analogous to the payment of a dividend. On the other hand, if the corporation were to run into temporary difficulties, it would no longer be able to rely on upsream activities for support. Section 6 of the Act therefore provides for the payment of grants. Those are, however, very much reserve powers.
Section 4 of the Act cuts BNOC off from the national oil account. It will, therefore, need a new financial structure. As we explained during the Committee stage of the consideration of this section, we believe that the corporation will need some reserves. That is because BNOC cannot rely alone on overdraft facilities to accommodate swings in its trading position. Oil trading is subject to fluctuation. If the corporation had no reserves, it might need to seek grants at frequent intervals, with corresponding frequent payments back to Government under section 5. This would not be compatible with the corporation acting as a commercial trader in oil. We consider that the appropriate reserves that the corporation should have is £30 million. This money will come from the national oil account.
Those reserves, together with the ability to borrow, will ensure that the corporation has a sound financial sructure to continue its role as a trader in oil, handling participation oil in the national interest. Limiting borrowing to £100 million will ensure the proper parliamentary control. I therefore commend this draft order to the House.

Mr. Edward Rowlands: The order is part and parcel of a policy which has destroyed an extremely successful BNOC and we shall vote against it on that ground tonight. We shall also use our vote tonight


to object to the shabby way in which the House has been treated by the Minister's rambling statement tonight on the financial restructuring of the State corporation.
Before I come to some aspects of the Minister's statement, let me remind the House of the order's background. The Minister said nothing about the fact that BNOC has been a remarkable success story. Within five years of its inception it was built up into a vibrant and profitable corporation. In 1982 its profits will be about £500 million gross. That is the measure of BNOC's success, owned, as it is, 100 per cent. by the Government.
More important than the profit aspect is the fact that BNOC was the only oil corporation in the North Sea which owed its undivided allegiance to this nation. In a North Sea dominated by the multinational oil corporations it had a vital role to play in the development of the smaller, more marginal and difficult fields in the late 1980s and early 1990s. We have no guarantee at all that the multinationals or the new creature, Britoil, will fulfil future national needs. BNOC was designed to provide the nation with such a guarantee and that has been destroyed by the Government.
It was only yesterday that the Minister of State acclaimed and trumpeted the development of the Clyde field. I hope that he will be the first to acknowledge that the planning and preparation of the Clyde development was BNOC's. Britoil can claim nil or minimum credit for the development proposals put forward to the Minister and subsequently approved. Those were BNOC's proposals and plans which Britoil merely inherited. BNOC has been broken up out of sheer ideological spite.
That was done, first, to produce a financially fragile State trading company, and then Britoil. I note the references in the order to Britoil, so we are in order to mention it. I do not wish to go over the general ground, save to say to the Secretary of State that although he has expressed great satisfaction about the sale of Britoil shares, I have searched in vain through all the debates on the Oil and Gas (Enterprise) Act—in Committee, on Report and on Second Reading—to find out whether he has defined "great satisfaction" as being a 72 per cent. non-take-up of the Britoil shares. However, I did find innumerable references to the right hon. Gentleman's belief that there was a large, eager share-buying public, gasping to buy those shares. Yet 72 per cent. of them remain in the hands of the underwriters. The new theme is that it was a marvellous exercise to rehabilitate underwriting in the City. Again, I can find no evidence to suggest that was the point and purpose of the Oil and Gas (Enterprise) Act. I hope, too, that the small shareholder who did buy those shares and who is now nursing a 25p to 30p share loss on each share, is greatly satisfied with the Secretary of State.

Mr. Douglas: The Government know about business.

Mr. Rowlands: Yes, this is the Government of business, with their financial whizz kids. I wonder if the members of the Post Office staff pension fund, who bought 10 million to 12 million shares—according to The Times the day before yesterday—are greatly satisfied that they now face a potential loss of some £2 million. I wonder whether Mr. Quartano or the chief executive of that fund, appointed by the Secretary of State to the Britoil board,

is greatly satisfied with the results and outcome of the Post Office pension fund's investment and the Secretary of State's appointment.
The Secretary of State has presided over one of the most spectacular Stock Exchange flops in living memory. A decent and honourable man would have resigned.

The Secretary of State for Energy (Mr. Nigel Lawson): Labour Members know nothing about such matters.

Mr. Rowlands: The right hon. Gentleman presided over a share flotation which left 72 per cent. of the shares in the hands of the underwriters.
We shall vote against the order to show our general opposition to both the Bill and this tawdry exercise. We also want to object to the shabby way in which the House has been treated on the important issues raised in the Minister's speech about the financial restructuring of BNOC.
It was said repeatedly by Opposition Members and others in Committee that there would be major problems about the financial nature of the State trading arm that would remain. We are setting up virtually a new State trading corporation with a new financial structure. It is worth reminding the House that it is a 100 per cent. Government-owned trading company. Will all the loans and funds be part and parcel of the public sector borrowing requirement?

Mr. Lawson: Yes.

Mr. Rowlands: Of course they will be. Therefore, there is a potential addition to the PSBR.

Mr. Lawson: It was always there.

Mr. Rowlands: Yes, but it was usually positive. Most of the cash flows of BNOC that went from the national oil account to the public sector borrowing account were positive. The Minister admitted that there was a high possibility that they would be negative in the next year or SO.
The company is not only 100 per cent. Government owned with a potential capacity to lose a lot of money, but it will have to live on its wits, its nerve and 10 cents. It is a 10 cent company. It will sell and buy its products for the same price.
Unlike any other trading commodity company, BNOC cannot—and rightly so—withdraw from its market, irrespective of the nature of that market, and however difficult it may be. Therefore, it will trade in massive amounts of oil, as the months ahead could show, in an extremely difficult soft oil market. Therefore, the financial structure of this stripped-down trading company must be of great and ultimate concern to the House.
Before the active vandalism that broke up the integrated oil corporation, the corporation had an enormous cash flow and a substantial asset base, as admitted implicitly in the Minister of State's remarks when he said that the company cannot rely on the upstream assets and profit potential of what was the integrated BNOC. Its trading role, though accounted separately, was effectively guaranteed by it being part and parcel of an integrated national oil corporation. Although it is an intangible factor, the trading and negotiating powers of the trading arm of that corporation were strengthened by it being part of an integrated national oil corporation. All those factors, as we said repeatedly in Committee, would lead to


difficulties for a State trading company dealing in the most marginal percentages—10 cents and so on—rather than being part and parcel of a tautly integrated national oil corporation.
We repeatedly warned the Government during debates on the Bill that what would be left is a financially weakened trading corporation. The exceptional financial arrangements in the Minister's rambling statement reflect that. It is an incredible insult to the House that the major financial restructuring of the corporation should not have been presented to Parliament properly. Not a single financial memorandum has been presented to the House. Not a single paper has been brought to the House except for the borrowing powers order, in which there is no reference to the £30 million cash injection that was announced tonight or to the character of that cash injection. Is it in the form of equity to the company? Apparently it is coming from the national oil account. We have no idea of the character of the national oil account, its balance sheet and what is left in there. Will the Minister of State ensure that a memorandum is published so that we can debate it properly in the House? This is a major financial restructuring of a 100 per cent. Government-owned trading corporation.

Mr. Lawson: It was discussed in Committee.

Mr. Rowlands: It was not discussed in Committee. We repeatedly mentioned financial restructuring. We never got a single scrap of information, as members of the Committee will testify.
We discussed the possibilities endlessly in Committee. We were never given the information that we have been given tonight. It should have been presented to Parliament properly through a financial memorandum, not by this scrappy order with a meagre explanatory note that makes no reference to the cash injection that the Minister has announced. We do not have a balance sheet for the national oil account and we do not know the character of the £30 million cash injection.
What the Secretary of State has said is no substitute for the proper presentation to the House of the issues and their full financial implications. Trying to unravel the confusion about the proceeds, the debentures and the financial fiddling that has gone on in the past few weeks is all the more reason why we should have had a proper statement and memorandum.
The Minister of State said that the £30 million is coming out of the national oil account. Will the Secretary of State explain two statements that he has made about the debentures and the total proceeds that will accrue to the Government from the sale? On 10 November he said:
The minimum price, on the minimum tender price, will be £548 million gross for the equity, plus £88 million for a debenture, of which £55 million will be paid into the national oil account, which gives total proceeds of over £600 million."—
[Official Report, 10 November 1982; Vol. 31, c. 549.] In fact, it gives total proceeds of £603 million. Where has the difference between £55 million and £88 million gone? Is it here?

Mr. Lawson: Yes.

Mr. Rowlands: Good. In that case, the right hon. Gentleman will have to withdraw his statement of 22 November when he said:
The total share issue will raise a gross sum of £548 million. In addition, Britoil will shortly repay, with interest, a debenture of £88 million. Total gross proceeds will be approximately £640 million.

Having allowed for the £11 ½ million for the bits and pieces associated with the sale, the Secretary of State said:
the total net proceeds from the disposal of Britoil are estimated to be in excess of £625 million"—[Official Report, 22 November 1982; Vol. 32, c. 596.]
In fact it was £628 million if one deducts the £11½ million from the £649 million. I assume that the Secretary of State was making the £30 million provision from the £88 million debenture as part of the cash injection into the new company.
On 22 November, the right hon. Gentleman did not refer to that, and claimed that the total proceeds of the £88 million debenture would be the sum that the Government collected as a profit for the sale. I beg him to intervene to tell me whether he was right on 22 November.

Mr. Lawson: There are two ways of calculating the issue. The hon. Gentleman is making heavy weather of the subject. Either one can net off the £30 million, which has been the capital injection into BNOC, as my right hon. Friend the Minister of State made clear, or one can not take that into account. They are both methods of calculation. It was completely open to the House to proceed one way or the other. All the figures were there—the size of the debentures, the equity proceeds and the cost of the share sale.

Mr. Rowlands: The right hon. Gentleman will have to do better than that. He did not give an either/or provision in either of those statements. On 22 November he said categorically that the net proceeds from the disposal of Britoil would be in excess of £625 million, in which he claimed the total £88 million debenture. Tonight, he has withdrawn at least £30 million, as that will be the cost of trying to refloat the financially fragile State trading company.
I had the honour and decency to make a personal statement to withdraw something that I said, at the request of the right hon. Gentleman and others. He should have the decency to do likewise with regard to his statement of 22 November. I invite him to do so.

Mr. Lawson: The hon. Gentleman had to withdraw a disgraceful allegation that the prospectus of Britoil was false. If that had been true, it would have been a criminal offence. He should have withdrawn his statement when he made it, rather than waiting 24 hours to do so. It was a disgraceful matter of which the hon. Gentleman should be ashamed.
With regard to the figures for the proceeds of the sale of Britoil, I originally felt that it might, in fairness to the Opposition, be correct to deduct the £30 million which was to have been paid to provide funds for BNOC. Subsequently, on examining the accounts more carefully, it was clear that the funds were already in the public sector. Therefore, there was no need to make that offer. My second and higher figure was correct. I have nothing to withdraw.

Mr. Rowlands: When the right hon. Gentleman misleads the House, we have the right to demand a proper withdrawal. He made no qualifications when he presented his statement on 22 November. He claimed that the net proceeds would amount to £625 million. He now says that £30 million will be deducted from that sum. That is what he is saying and that is what the Minister of State has said. That is why we have every right to demand a withdrawal from the right hon. Gentleman. I have the honour of being


able to say that I withdrew when it was right to do so. The right hon. Gentleman will not have that honour and we note his behaviour. [AN HON. MEMBER: "Sue him in public."] We most certainly will. The Minister of State spoke of a cash injection of £30 million. In what form will it go into BNOC's account? Is it equity? If it is, will there be dividends? Will the Government receive dividends on the £30 million? Is it a straightforward £30 million subsidy? Is it grant in another form? We are entitled to know the character and nature of the £30 million cash injection.
The Minister of State said that provision had been made in section 6 for the payment of grants. Is that provision to be redundant, or will it remain in place in case the company runs into even greater problems and deeper waters? The section anticipated the potential lame-duck character of the trading company. In Committee we warned repeatedly of that possibility. We are entitled to a much better explanation than the one that we have received tonight.
The destruction of the national oil corporation, the farcical flotation of Britoil and the financial mumbo-jumbo that has been presented this evening are features of a policy that has oscillated between the scandalous and the incompetent. I ask the House to register its objection to it by voting against the order.

Dr. J. Dickson Mabon: There is no doubt that the British National Oil Corporation is the Government's unwanted child. If they had been able to sell off the trading section of the old BNOC with Britoil, I am sure that they would have done so.
The Government realised that for two formidable reasons they could do nothing else but keep the corporation alive. First, they had more than 60 major legal contracts involving in excess of 100 companies that would have had to be renegotiated with the private company, Britoil, if the integrated scheme of BNOC had been transferred from the public sector to the private sector. That is why BNOC is left as the holder of the participation contracts in the national interest. They are under the signatures of the Secretary of State, BNOC and all the other third parties. I am certain that there would have been a great effort by the companies to weaken the participation agreements if renegotiation had been necessary. However, I am sure that the Government would have been careless about that if that had been the sole obstacle.
There was a greater obstacle. The right hon. Member for Sidcup (Mr. Heath) became aware of it as a result of the oil price increase of 1973. The strategic control of oil was and is essential. The right hon. Gentleman had a bitter awareness of this in his experience with British Petroleum. The previous Labour Government were not prepared to see the participation agreements being of such a nature that they would lose strategic control of the disposition of the oil.
The only reason why the BNOC exists today is that the Conservative Party, despite its doctrinaire prejudices, can find no way to get out of difficulty. As it is the "Orphan Annie" or unwanted child of the Government, they are not careful about their sums in relation to it.
I shall not develop the splendid arguments of the hon. Member for Merthyr Tydfil (Mr. Rowlands), who made

a good speech about the general fate of the BNOC and the emergence of Britoil. I shall confine myself to the BNOC. We have had no explanation, either in Committee or elsewhere, about the corporation's position. This miserable order is the basis upon which we are supposed to conduct a debate, in restricted time, about the future of a trading corporation that even the Conservative Party cannot abolish. It will be on the political scene for the remainder of this century and beyond. As the exigencies of the international oil market develop, whichever party is in power must use the BNOC in a wider role that is conceived by this miserable, bookkeeping Government.
I wish the chairman and the board of the corporation well. They have an enormously difficult task; and no doubt, with the problems of the oil market, they will have many disappointments and setbacks. They may have to come to the Government to be rescued from the cash flow difficulties that any oil trading company must face. At times, the corporation will make money, and I hope that those times are much more frequent than their periods of losses. However, I question whether the figures are correct.
I do not wish to be too harsh on my old Department, but this is not the first order. The first was withdrawn, perhaps because the parliamentary draftsmen had a headache after their toils on the Oil and Gas (Enterprise) Act 1982. I do not know whether this is a second attempt at the figures, but they are wholly unconvincing. In his interventions, the Secretary of State Mentioned the magic figure of £30 million, and the Minister of State began to defend it. I am always worried when the Minister wears his red socks. The hon. Member for Antrim, North (Rev. Ian Paisley) has a great prejudice against red socks, so perhaps when the Minister wears them it means that he has a bad case. Tonight he could not explain, even to his own satisfaction, the figures in the order.
If one listened closely to the Minister's remarks, one found that the matter is so flexible as to make the order almost meaningless. The figures are only markers, because there is enough latitude for the Minister to come back and to say that he will provide more money to the BNOC. We are not worried about the corporation making money, but we are worried about it remaining solvent. The hon. Member for Merthyr Tydfil described the corporation as "fragile". Everyone, whatever his politics, must accept that it will be a fragile corporation. It will exist solely on trading. It will be a middle-man. It will have nothing to do but to trade with a limited amount of oil, which is limited because of the participation agreements. The corporation must sell the oil as it comes out of the ground and will have no control over the flow of oil. It will sit there passively receiving oil, and must sell it there and then.
We had an argument about storage. The hon. Member for Dunfermline (Mr. Douglas) rightly asked where we could store the oil. What flexibility does the corporation have for the storage of oil? The Minister did not even tell us about the quantity of oil that would constitute the annual turnover of the corporation, but the amount cannot be insignificant. Even if a good trader thought it wise to store the oil for six months, would he have the capacity to do so, or would he have to rent that capacity at exorbitant rates? Would it be stored in tankers? We have been told nothing about this.
This poor wretched corporation is presented to Parliament in that way. We are not told what it will do. I suspect that the Department of Energy does not know what it will do. No one has thought the matter through.
I do not think Ministers really care. They are anxious to get Britoil on the road, and now they are left with the fag end of the British National Oil Corporation. Therefore, I am glad that we are seeking an opportunity tonight to deny the Government this order. They should think the issue through much more carefully and clearly, and should come back to the House ready for a proper debate so that the future of the corporation can be discussed, because by definition it will remain whichever Government are in power.
The Minister referred to the public sector borrowing requirement and how BNOC would fall within it. It is worth reflecting that, when BNOC borrowed money on the New York exchange in 1976 on the strength of the oil that it would produce, it was rightly argued that it should not have been within the public sector borrowing requirement. That has since been denied, but if a nationalised corporation under Treasury rules raises money in that way the PSBR is taken into account. I have never understood that. I am sure that all hon. Members would agree that the public sector borrowing requirement ought to be divided into two parts—the productive and investment part and the spending part. The assessment of those two matters should be treated in entirely different ways. Given the way in which BNOC is presently constituted, it will be within the spending sector, but it will remain an unpredictable factor.
The order should be rejected not only because it is inadequate and does not explain the position of the corporation but because the House should debate the position of BNOC in relation to its possible future activities.
It has been my privilege and that of the Minister and the right hon. Member for Lanarkshire, North (Mr. Smith) to travel abroad on behalf of this country and to help other countries to explore for and to produce oil in their areas with our assistance. Many countries believe that they cannot allow any "private" companies to go into these areas, and Britoil would be a private company.
BNOC therefore represents the only British instrument that could offer exploration and production in countries with collectivist or Socialist economies that might wish to use a State company to carry out their programme. I refer to Petrobras of Brazil which has explored and developed oil in Iraq. That is an example whereby the Iraqis would deal not with a private company but only with a State company. In Britain we no longer have that facility, thanks to our abandoning BNOC. I suggest that BNOC might resume that role at a later stage. We should not approach BNOC simply as a trading corporation. We should consider some other potential, and that should be discussed.
I regret that the Minister of State has presented the order with such an inadequate speech. It is unlike him, but I suppose that this comedy of errors must go on.

Mr. Dick Douglas: I shall be very brief—[Interruption]. The hon. Member for Bedford (Mr. Skeet) may say "Hear, hear", but in Committee on the Oil and Gas (Enterprise) Bill, he tabled a sensible amendment to keep BNOC in British hands as a fully integrated company. Such a company should have an upstream

facility for exploration and production, and a downstream facility for sales, not to mention refining and other activities.
The hon. Member for Bedford knows that I supported that amendment, because the logic of oil enterprises is to have upstream and downstream facilities fully integrated. However, in their complete lack of wisdom, the Government have hived off the exploration and production capacities of BNOC into Britoil. Britoil will be able to move downstream into marketing, but we have hived off BNOC in suspended animation to be wholly, singularly and peculiarly a marketing operation.
The hon. Member for Aldershot (Mr. Critchley), writing in The Listener, posed certain questions. He asked how we prevent the sale of Exocets. The answer is "Put the Secretary of State for Energy in charge of them". Others may ask how we produce an instrument that is so precarious that no one other than the Conservative Government would wish to underwrite it in terms of the PSBR. We do so by creating the BNOC as a trading company.
As I have repeatedly said, the oil market is at present more than usually flexible and erratic. No one knows how OPEC will behave in the next few months, but it is a matter of public record that the Saudis are sick to death at the behaviour of the Iranians, the Libians and the Nigerians. They could go one of two ways. They could say that over a certain period they will guarantee the price at $34 a barrel for X years hence. On the other hand, they could say that instead of producing 5 million barrels a day, they will open the valves and produce more. The price might drop to below $20 a barrel if they were to do so.
At present the Minister has an excellent Permanent Secretary in his Department who is an authority on relations with the Arab world, and I challenge the Minister to say how the price of oil will fare. Despite this, the House is being asked to underpin a tradng company that will enter into contracts to buy oil at a certain price—say, $34 a barrel—and it will have to sell that oil at a similar price, either domestically or on the world market.
We know that the spot market is falling. It is all very well for the Minister to say that a small proportion of the oil is traded on the spot market, but that market is an indicator of what the free market will bear. That is what the Tory Government are asking the country to buy and to underpin.
My hon. Friend the Member for Merthyr Tydfil (Mr. Rowlands), in an excellent speech, asked certain questions. Where is the proforma balance sheet for BNOC? A costly prospectus has been issued for Britoil. I have no doubt that the scrap paper merchants in Glasgow and elsewhere have made a tremendous coup in gathering in the ones that were not taken up, but we have had no proforma balance sheet for BNOC. What are the assets of the company? Its only assets are the opportunities that were acquired by a Labour Government to purchase oil in participation agreements and other agreements.
The Secretary of State is asking us to underwrite and underpin an extremely precarious corporation. We have not been told the amount of oil or the degree of public sector exposure involved. The Minister of State, who is knowledgeable in these matters and understands their importance to his constituency and to Scotland, must recognise that it is extremely harmful to Britain's status in the world to have a corporation trading in oil unless it is fully and harmoniously backed by the Government of the


day. He has severed the connection with the upstream facilities. He has exposed the corporation to a 10 per cent. place in a hazardous international oil market. Therefore it would not be wise to support the order. The Minister of State knows that we should not accept this degree of public sector exposure. Therefore, I hope that my right hon. and hon. Friends will oppose the order and that other Members will be similarly persuaded.

Mr. Frank Hooley: This is a tidying-up operation after one of the most squalid and corrupt acts of any Government of this century. I say "corrupt" deliberately because there was no case in public policy for selling off to private interests one of our most valuable public institutions. My hon. Friend the Member for Merthyr Tydfil (Mr. Rowlands) has pointed out that in terms of profitability, expertise and success, there was no reason to fault the record of BNOC in its short history. It had been a wholly successful and wholly publicly funded enterprise and there was no ground to suggest that it was a public liability, a lame duck or incompetent, or that it had failed the nation. Nevertheless, in pursuit of a stupid ideology, the Government decided to destroy a great national asset and to break it up into two component parts, giving what they consider to be the profitable part of the enterprise to private interests to exploit as best they can, but leaving this peculiar rump, which has been the subject of our debate, to sink or swim by itself.
My hon. Friend the Member for Dunfermline (Mr. Douglas) referred to the volatile nature of the international oil market. It will, perhaps, be relevant to touch upon one or two aspects of that international oil market that could create severe difficulties for any company such as BNOC now trading in oil.
The serious political instability in the Middle East could produce a savage reaction from Saudi Arabia if the Americans flatly refuse to do anything about the Israeli occupation of the Lebanon. I should be out of order to go into the details of that, but we know that there is a powerful political connection between Saudi Arabia's oil policy and the general political situation in Palestine.
A conflict is still going on between Iran and Iraq. A little while ago, Iraq claimed—although, I believe, not altogether correctly—to have sunk several large tankers, or at least to have posed a serious military threat to the flow of oil to and from the key areas in Iran. If that war suddenly goes either way, it could have massive repercussions on the international flow of oil, and consequently on the oil price. It would thus create serious difficulties for BNOC's operations.
Huge oil reserves have been reported off the coast of California. I do not know how positive the drilling and the tests have been, but only a few years ago gigantic reserves were discovered in Mexico. I have not the slightest idea whether the Californian deposits are related to them, but the early reports were of massive reserves of oil off that coast. If that is so, it could considerably alter the future pattern of international oil trade. A fluctuation of 50 or 70 cents in the price of oil means changes of thousands and millions of dollars. To that extent, BNOC—the orphan of the Government's corrupt exercise a short time ago—could be placed in an extremely difficult position.
I understand the Minister to say that BNOC's turnover is about £7,000 million. If I understand the order correctly, the borrowing power of £100 million is, for all practical purposes, the company's working reserve. I would not have thought that a working reserve of £100 million was adequate for a company that will handle a turnover of £7,000 million at least per annum, especially given the volatility and uncertainty of the international oil market.
Therefore, the order may not be the final episode in a very squalid exercise, but it raises many more queries than it settles. So far the order has been handled incompetently, having been redrafted, and re-presented, and that does not give us much confidence that the Department of Energy knows what it is doing.

Mr. Dennis Canavan: It is surely a sad irony that the Minister, who represents a Scottish constituency, should introduce an order that represents the latest chapter in the sorry saga of the destruction of public enterprise by the Tory Government. The Government are attempting to destroy one of the most successful public enterprises of recent years.
It is a sad irony that a Member of Parliament who represents a Scottish constituency should introduce such a destructive measure, because the headquarters of the prestigious BNOC were set up in Glasgow by the previous Labour Government. No wonder the Minister is hanging his head in shame. He should be thoroughly ashamed of himself, introducing this shabby order and letting down the people of Scotland.
I do not know why the Minister is now shaking his head. BNOC was one of the most successful public enterprises. During the last financial year it made a profit of nearly £500 million. The Government are so doctrinaire that if public sector corporations or nationalised industries are making what they call a loss, they knock or kick them for making that loss. If they are making a profit, their policy is to try to sell them off.
There is no rhyme or reason behind the order or the Act which initiated it. It is a senseless piece of public asset-stripping designed to reduce BNOC to a company which will merely trade in oil rather than be dynamic and adventurous in exploring for and producing oil. The order is yet another milestone on the way to the complete emasculation of the BNOC. It will make us one of the few major oil-producing countries which does not have a national oil corporation.
The Government are so Right wing and doctrinaire and so much in love with private enterprise that they are even more laissez faire than many other right-of-centre Governments in oil-producing countries. Such legislation and orders show how extreme the dirty, rotten Conservative Government are.
When the decision to sell was made, it would not have been so bad if the Government had managed to handle the sale reasonably competently, but they made a shambles of selling off BNOC. The way in which it was done was contrary to the public interest. The Secretary of State, the Minister and all the other people in the Department of Energy—with perhaps some exceptions in the Civil Service—at ministerial level are collectively so incompetent and irresponsible that I doubt whether they could organise a booze-up in a brewery, let alone an oil refinery.
Their incompetence can be seen by the mistakes that were made in the draft. The original order had to be


withdrawn because of the mistakes it contained. A first-year pupil in any secondary school who looked at the parent Act could have drafted this order. The Minister initially introduced rubbish to the House. It had to be withdrawn and re-presented after the mistakes had been tidied up. That shows the crass stupidity and incompetence at ministerial level in the Department of Energy.
There may be some Conservative Members who believe that this order will be another nail in the coffin of public enterprise, but, thanks to the commitments made by my right hon. and hon. Friends on the Opposition Front Bench, it is clear that if there is a corpse in the coffin it will be resurrected. The resurrection will come after the next election when a Labour Government will breathe life into the British National Oil Corporation and the rest of the public sector. Once again, successful public enterprise will be meeting the energy needs of this country and contributing to the international community, instead of responsibility being handed over to private entrepreneurs who are interested simply in lining their own pockets.
When the next Labour Government introduce the necessary legislation to enable the public sector to bloom again, to bring about the renaissance of the British National Oil Corporation and everything else that the Government have tried to sell off and to extend the growth of public enterprise into profitable manufacturing industry, the final irony could be that some hon. Members will not be here to witness it. I am sure that the Minister of State will be kicked out by the good people of Ross and Cromarty for selling them down the river along with the people of Scotland and the people of Britain. The previous Minister of State, the right hon. Member for Greenock and Port Glasgow (Dr. Mahon), will also, I am sure, be kicked out by the good people of his constituency.

Mr. Gray: I am grateful to the hon. Member for West Stirlingshire (Mr. Canavan) for his friendly remarks. He always enlivens our debates. His contributions were enjoyed in Committee. I am glad that he has not lost his touch.
I am sorry that the hon. Member for Merthyr Tydfil (Mr. Rowlands) should have described my opening speech as long and rambling. He cannot have listened to much of what I had to say. My speech dealt with a number of points that he raised. The same applies to the remarks of a number of hon. Members. I shall, however, try to deal with some of the matters that have been mentioned.
The hon. Member for Merthyr Tydfil was anxious to know how the British National Oil Corporation would carry out trading. The trading arm of the corporation acted very much on its own even before BNOC was separated and Britoil created. During that five-year period, it managed always to make a profit. Those who were running the trading at that time will still be running it. The board has been split, some of it going to Britoil and some retained in the corporation. The Government have, however, strengthened the board substantially with people of high repute who would not have considered it worth their while to join if they had not seen a future in the British National Oil Corporation.
The hon. Gentleman need not, therefore, worry too much about the trading arm. If BNOC has problems with its trading activity, what would the Opposition like the Government to do? Would they prefer that we should simply leave BNOC? After all, it is 100 per cent. owned—

[Interruption] The hon. Member for Dunfermline (Mr. Douglas), who keeps prattling from a sedentary position, must wait until I deal with his contribution. The hon. Member for Merthyr Tydfil is also usually a reasonable man in these debates.
The right hon. Member for Greenock and Port Glasgow (Dr. Mabon) gave some of the reasons why BNOC was retained. It has been retained as such because of the security of supply. The Government will have 100 per cent. control over BNOC and over supplies. We believe that that is the role of the Government. We see no reason why the Government should be involved in the upstream section, which could he carried out much better and at no expense to the taxpayer by the private sector. That is why we split off Britoil and floated it to the private sector, where it has a good future ahead of it and will carry on exploring in the usual way.
The hon. Member for Merthyr Tydfil mentioned the £30 million, which I do not propose to deal with again. My right hon. Friend the Secretary of State answered him with complete honesty and adequacy. He explained the position in the two statements referred to by the hon. Gentleman, and there is no need to elaborate. The £30 million for BNOC will remain in the public sector and cannot be set against repayment of debenture. That is clear.

Mr. Rowlands: There are two points that must be answered. First, in the statement on 10 November, the Secretary of State deliberately left out £33 million in his calculations of the net proceeds, obviously anticipating the type of arrangement that has now been made. When he came to explain on 22 November, to boost the figure to make it look like more, he added the £30 million to the net proceeds that the Government were to obtain.
Secondly, and more important, in what form is the £30 million to be put into BNOC—cash, equity or what?

Mr. Gray: I shall not deal again with these—

Mr. Douglas: Why?

Mr. Gray: I do not know what the hon. Member for Dunfermline is thinking about. He is making another speech from a sedentary position.
The two statements put the matter clearly, and my right hon. Friend has already dealt with this point adequately.

Mr. John Smith: What were the net proceeds from the sale of Britoil?

Mr. Gray: My right hon. Friend the Secretary of State made this clear in his statement of 22 November, when he said:
The total share issue will raise a gross sum of £548 million. In addition, Britoil will shortly repay, with interest, a debenture of £88 million. Total gross proceeds will be approximately £640 million … In all, the total net proceeds from the disposal of Britoil are estimated to be in excess of £625 million."—[Official Report, 22 November 1982; Vol. 32, c. 596.]
Full details of the way that the £30 million w ill be paid will be given to the House as soon as all the arrangements are complete. Labour Members would be the first to complain if matters of this type were rushed, as BNOC has just started in its new role. It must be given a few months to see how it develops.

Mr. Rowlands: The hon. Gentleman has announced the £30 million cash injection into BNOC this evening, and we have no other information apart from what he has told us. It is not a question of months; we want to know in what form that money will be put in. Secondly, and


more importantly, will it be subject to any form of parliamentary accountability? Will it be in the form of an order or a financial memorandum? Will the House have to approve it?

Mr. Gray: This is the order in which this is contained. The hon. Gentleman has had it spelt out in detail in my opening speech. If he does not listen to these things, that it is not my fault.

Mr. John Smith: Is the £30 million which the hon. Gentleman has revealed for the first time a grant from Parliament to BNOC? If it is not that, what is it?

Mr. Gray: I have already explained that the £30 million comes from the national oil account. It is not a grant from Parliament; it is a transfer from the national oil account to BNOC. It is not a grant, and it will be accountable. I cannot be more explicit than that. BNOC will be accountable, as it always has been. The fact that Britoil has been split away merely leaves BNOC as the trading arm, which is accountable in the same way as it always has been.
The hon. Member for Dunfermline raised a number of issues, and was concerned about storage. The point has been made that supplies might have to be held for about six months. It is well known that an oil trader would never hold oil willingly for six months. At no time has BNOC held oil for anything like that period. BNOC, as has been its practice in the past, will be in a position to lease tankers for the purpose of storing oil for short periods. BNOC has not and never has had any onshore oil storage. That is not part of its role at all. I explain that for the benefit of the hon. Member for Dunfermline and the right hon. Member for Greenock and Port Glasgow.

Dr. J. Dickson Mahon: The order does not encompass the financing of storage tanks by BNOC. It will carry on in the old way. It will not finance onshore storage.

Mr. Gray: That will be a matter for the corporation. However, we do not envisage circumstances in which the corporation would be likely to wish to lease onshore storage. It seems more probable that it will continue as it always has in its oil trading.
The hon. Member for Sheffield, Heeley (Mr. Hooley) raised several points. I must explain to him that BNOC buys participation oil at market price, as it has done since the system was established. That represents between 500,000 and 600,000 barrels a day. Those are sold in arm's length deals to third parties. BNOC handles 1·2 billion barrels a day of participation and royalty oil, but more than half of that is sold back to the producers who are also United Kingdom refiners.
The hon. Member for Heeley was also worried about the world oil market, which was also referred to by the hon. Member for Dunfermline, who answered his own question. Of course, I am not in a position to anticipate what the OPEC countries may decide. I would not be prepared to estimate the future for world oil prices. Nobody in my position could possibly estimate that. However, that position is not new. BNOC has had to make such allowances and assessments since it was created. As I mentioned earlier, that hazard has been overcome in the past by the trading arm of BNOC and we are confident that it will continue to be able to handle matters.

Mr. T. H. H. Skeet: Of course we have a soft oil market, but if the world price dropped to $30 a barrel or less, would the £30 million reserve be sufficient to sustain BNOC?

Mr. Gray: Yes. The difference in the borrowing power between £100 million and £150 million is also adequate, as the corporation agrees.

Mr. Douglas: BNOC will be responsible for marketing about 25 per cent. of our North Sea output. The Minister is asking the corporation to embark on that on a slim financial basis. Is he absolutely sure that the provision is adequate?

Mr. Gray: The Government believe that the structure will be adequate, and the corporation agrees.
The hon. Member for West Stirlingshire made wild statements. He even suggested that the right hon. Member for Greenock and Port Glasgow and I might not be in the next Parliament. Many of us would not weep if the hon. Gentleman was not in the next Parliament, but that is a remote hope.
The hon. Gentleman made outrageous and vitriolic remarks about the Government and our policies. The Government's decision to split the corporation into the upstream company, Britoil, and to retail BNOC purely as a trading arm is nothing new. In 1975 when the right hon. Member for Lanarkshire, North (Mr. Smith) was speaking from these Benches, we stated that we would vote against the creation of BNOC and when we were returned to office would examine the situation and, if possible, make improvements. We believe that BNOC should be 100 per cent. State-controlled to look after our security of supply but that the Government should not be involved beyond that. It is right that Britoil should be owned outside the Government but that the Government should retain an interest. We believe that the structure will work well.
I commend the order to the House.

Mr. John Smith: I had not intended to intervene in the debate. I had hoped that the Minister would respond adequately to the important questions raised by my hon. Friend the Member for Merthyr Tydfil (Mr. Rowlands) about the missing £30 million.
On 22 November the Secretary of State, in a statement to the House said that the total gross proceeds from the sale of Britoil would be approximately £640 million, which included a debenture of £88 million. Of that £88 million, £30 million will be given to BNOC. Indeed, that is what the Secretary of State said earlier. The mystery deepens. On 10 November in another statement to the House the right hon. Gentleman talked about £55 million coming back from the debenture. The difference between the £55 million and the £88 million, which he mentioned later, is what we are talking about—the money for which the Government are asking Parliament's sanction to give to BNOC.
The Secretary of State gave one explanation on 10 November, which is justified by the order. Ashamed at the response to Britoil by the public he dressed up his statement on 22 November and claimed credit. That is inconsistent. Earlier today the Secretary of State gave alternative explanations. One was right and the other was


wrong. Unfortunately for him, the wrong one was the one that he gave the House on 22 November when attempting to justify the Britoil issue.

Mr. Lawson: The figures that I gave on 22 November were correct. The right hon. Gentleman has no warrant for saying anything else. The figures were correct and the Government stand by them.

Mr. Smith: In that case will the Secretary of State explain what he meant when he said on 10 November that the proceeds from the debenture repayment would be £55 million?

Mr. Lawson: I did not say that.

Mr. Smith: I shall quote the Secretary of State. He said:
The minimum price on the minimum tender price, will be £548 million gross for the equity, plus £88 million for a debenture, of which £55 million will be paid into the national oil account."—[Official Report, 10 November 1982; Vol. 31, c. 549.]
That leaves a £33 million difference. What did the Secretary of State mean?

Mr. Lawson: I do not know why the right hon. Gentleman makes so much of that. I suppose it is because his case on the order is so palpably weak. His case is nugatory. As I said on 10 November, the debenture was £88 million. That is in Hansard. It is a fact. There was also a £30 million transfer from the national oil account to BNOC which I deducted because I tried to be helpful to the Opposition— [Interruption.] I felt that I had bent over backwards for the Opposition. When I checked the figures I found that there was no reason to deduct that sum since it is a transfer from one part of the public sector to another part of the public sector. [HON. MEMBERS: "What?"] Yes, it is. That has been made clear. The full figure of £88 million should be counted as the proceeds for Her Majesty's Government. That is the figure that I gave on 22 November. That is clear. Nothing that the right hon. Member for Lanarkshire, North (Mr. Smith) has said has derogated from that.

Mr. Smith: I have never heard a Secretary of State come to the Dispatch Box with such a story of "Now you see it, Now you don't". In his generosity to the Opposition the Secretary of State deducted the missing £30 million in his statement. In Hansard my hon. Friend the Member for Merthyr Tydfil is recorded as saying from a sedentary position "That is bogus". It was. My hon. Friend has never said a truer word. The Secretary of State has been caught out. Now he tells us that the £30 million that we are deciding to give to BNOC is to be counted as an asset. What if it is necessary to use that £30 million to make up BNOC losses? The Secretary of State will say "Never mind. It is still there. We have still got it".
The Secretary of State was either correct on 10 November or on 22 November. He claims to have been correct on both occasions. The only difference is £30 million. That will not do. If the Minister in charge of energy can negligently miss £30 million in 12 days we are in a sorry state.
What is worse, Parliament is being asked to sanction this £30 million without knowing what it is. The Minister of State could not say what it was. Is it equity? Is it public dividend capital on which we will be entitled to a return? Is it a simple grant or a subsidy? What is the nature of the money?
The Minister of State said that he would not rush things and that he could not tell us the details. Surely it is elementary, when the Government are asking for parliamentary approval of the spending of money, to ask them to say how the money will be spent. It is intrinsic to the approval that Parliament should be told that.
The Secretary of State misled the House gravely in the discrepancy between his two statements. He should reflect overnight on whether his pugilistic stance is in his long-term interests. He might do better to reflect carefully and consider making a personal statement to the House. He should consider whether he owes an apology to the House for his statement on either 10 November or 22 November. On his admission, both cannot be correct. He must make a choice between one or the other. He misled the House either on one occasion or on the other.

Mr. Canavan: Apologise.

Mr. Smith: It is time that the Secretary of State took his responsibilities seriously. I see that the Minister of State wants to give an explanation.

Mr. Gray: The right hon. Gentleman must have forgotten that the money is being transferred under his Act. It is being transferred under the powers of the Petroleum and Submarine Pipe-lines Act, which the right hon. Gentleman was responsible for putting through. It is as simple as that.

Mr. Smith: That is a dazzling point. Because Parliament gives powers to a Minister, Parliament is presumed to have endorsed all the stupid uses of the powers that Ministers will get up to. That is a bald proposition, even from the Minister of State.
The Minister of State and the Government, supported by the Secretary of State and his inadequate explanations, have come before Parliament with an ill-prepared and ill-thought-out order. When Parliament does the necessary job of probing it and asking for explanations, they are found to be singularly lacking. The Secretary of State has been caught out by his own words in Hansard because of the discrepancy between his statements on 10 and 22 November.
It is about time that the Secretary of State and his colleagues realised that they have perpetrated an enormous fiasco with the splitting up of BNOC and the floating of Britoil. Many people are bitter about it. The Secretary of State will be well aware that some of the underwriters whom the Government leaned on during this issue suffered the loss of millions of pounds, as did the Post Office superannuation fund, the chief executive of which is also a director of Britoil. He wanted the Government to ensure that there was a massive investment in Britoil, but about £2 million of the fund has been lost as a result of the exercise, which was carried out to perpetuate the ideological obsessions of the Government rather than to pursue a genuine concept of the public interest.
This is an appalling order. The debate has been useful because it has flushed out not only its inadequacies but the capacity of the Secretary of State to mislead not only himself but the House. The matter will not be left where it stands. It will be pursued actively in the weeks and months ahead.

Question put:—

The House divided: Ayes 128, Noes 79.

Division No. 32]
[11.43 pm


AYES


Alexander, Richard
Knight, Mrs Jill


Ancram, Michael
Lamont, Norman


Aspinwall, Jack
Lang, Ian


Atkins, Rt Hon H.(S'thorne)
Lawson, Rt Hon Nigel


Atkins, Robert (Preston N)
Lester, Jim (Beeston)


Atkinson, David (B'm'th,E)
Lloyd, Peter (Fareham)


Baker, Nicholas (N Dorset)
Loveridge, John


Beaumont-Dark, Anthony
MacGregor, John


Benyon, Thomas (A'don)
MacKay, John (Argyll)


Berry, Hon Anthony
McNair-Wilson, M. (N'bury)


Bevan, David Gilroy
Major, John


Biggs-Davison, Sir John
Mates, Michael


Blackburn, John
Mather, Carol


Boscawen, Hon Robert
Maxwell-Hyslop, Robin


Bright, Graham
Mellor, David


Brinton, Tim
Meyer, Sir Anthony


Brooke, Hon Peter
Mills, Iain (Meriden)


Brown, Michael (Brigg &amp; Sc'n)
Moate, Roger


Bruce-Gardyne, John
Montgomery, Fergus


Buck, Antony
Morrison, Hon C. (Devizes)


Budgen, Nick
Mudd, David


Carlisle, John (Luton West)
Murphy, Christopher


Carlisle, Kenneth (Lincoln)
Myles, David


Carlisle, Rt Hon M. (R'c'n)
Neale, Gerrard


Cope, John
Nelson, Anthony


Corrie, John
Neubert, Michael


Cranborne, Viscount
Newton, Tony


Dorrell, Stephen
Onslow, Cranley


Dover, Denshore
Osborn, John


Dunn, Robert (Dartford)
Page, Richard (SW Herts)


Eden, Rt Hon Sir John
Parris, Matthew


Eggar, Tim
Patten, Christopher (Bath)


Elliott, Sir William
Pattie, Geoffrey


Emery, Sir Peter
Proctor, K. Harvey


Fairgrieve, Sir Russell
Rathbone, Tim


Faith, Mrs Sheila
Rhodes James, Robert


Fenner, Mrs Peggy
Roberts, M. (Cardiff NW)


Fletcher, A. (Ed'nb'gh N)
Roberts, Wyn (Conway)


Fletcher-Cooke, Sir Charles
Rossi, Hugh


Forman, Nigel
Rumbold, Mrs A. C. R.


Goodlad, Alastair
Sainsbury, Hon Timothy


Gow, Ian
Shaw, Giles (Pudsey)


Grant, Anthony (Harrow C)
Shepherd, Colin (Hereford)


Gray, Rt Hon Hamish
Sims, Roger


Griffiths, Peter Portsm'th N)
Skeet, T. H. H.


Gummer, John Selwyn
Smith, Tim (Beaconsfield)


Hamilton, Hon A.
Speed, Keith


Hampson, Dr Keith
Speller, Tony


Hannam, John
Spicer, Michael (S Worcs)


Hawkins, Sir Paul
Sproat, Iain


Heddle, John
Stainton, Keith


Henderson, Barry
Stanbrook, Ivor


Hogg, Hon Douglas (Gr'th'm)
Stevens, Martin


Howell, Rt Hon D. (G'ldf'd)
Stewart, A. (E Renfrewshire)


Hunt, John (Ravensbourne)
Stradling Thomas, J.


Jopling, Rt Hon Michael
Taylor, Teddy (S'end E)


Kaberry, Sir Donald
Temple-Morris, Peter


Kershaw, Sir Anthony
Thomas, Rt Hon Peter





Thompson, Donald
Watson, John


Thorne, Neil (Ilford South)
Wells, Bowen


Townend, John (Bridlington)
Wilkinson, John


Trippier, David
Young, Sir George (Acton)


van Straubenzee, Sir W.



Waddington, David
Tellers for the Ayes:


Waller, Gary
Mr. David Hunt and


Warren, Kenneth
Mr. Tristan Garel-Jones.


NOES


Alton, David
Hughes, Robert (Aberdeen N)


Atkinson, N.(H'gey,)
Janner, Hon Greville


Bagier, Gordon A.T.
Mabon, Rt Hon Dr J. Dickson


Beith, A. J.
McElhone, Mrs Helen


Bennett, Andrew (St'kp't N)
McGuire, Michael (Ince)


Booth, Rt Hon Albert
McKay, Allen (Penistone)


Brown, Hugh D. (Provan)
MacKenzie, Rt Hon Gregor


Callaghan, Jim (Midd't'n &amp; P)
McWilliam, John


Campbell-Savours, Dale
Marshall, D (G'gow S'ton)


Canavan, Dennis
Marshall, Jim (Leicester S)


Cocks, Rt Hon M. (B'stol S)
Martin, M (G'gow S'burn)


Cook, Robin F.
Millan, Rt Hon Bruce


Cowans, Harry
Morton, George


Craigen, J. M. (G'gow, M'hill)
Oakes, Rt Hon Gordon


Crowther, Stan
O'Neill, Martin


Cryer, Bob
Palmer, Arthur


Cunningham, Dr J. (W'h'n)
Parry, Robert


Dalyell, Tam
Penhaligon, David


Davis, Terry (B'ham, Stechf'd)
Powell, Raymond (Ogmore)


Deakins, Eric
Prescott, John


Dean, Joseph (Leeds West)
Rees, Rt Hon M (Leeds S)


Dixon, Donald
Robertson, George


Dormand, Jack
Ross, Stephen (Isle of Wight)


Douglas, Dick
Rowlands, Ted


Dubs, Alfred
Skinner, Dennis


Duffy, A. E. P.
Smith, Rt Hon J. (N Lanark)


Eastham, Ken
Snape, Peter


Ellis, R. (NE D'bysh're)
Spearing, Nigel


Evans, John (Newton)
Steel, Rt Hon David


Field, Frank
Stoddart, David


Foulkes, George
Stott, Roger


George, Bruce
Strang, Gavin


Grant, John (Islington C)
Tinn, James


Hamilton, W. W. (C'tral Fife)
Urwin, Rt Hon Tom


Hardy, Peter
Welsh, Michael


Harrison, Rt Hon Walter
Winnick, David


Haynes, Frank
Woolmer, Kenneth


Hogg, N. (E Dunb't'nshire)



Home Robertson, John
Tellers for the Noes:


Homewood, William
Mr. Lawrence Cunliffe and


Hooley, Frank
Mr. Hugh McCartney.


Howells, Geraint

Question accordingly agreed to.

Resolved,
That the draft British National Oil Corporation (Borrowing Powers) Order 1982, which wad laid before this House on 9th December, be approved.

British Steel Corporation

The Minister of State, Department of Industry (Mr. Norman Lamont): I beg to move,
That the draft British Steel Corporation (Reduction of Capital) Order 1982, which was laid before this House on 6th December, be approved.
In opening this debate on what is in essence a technical financial order concerned entirely with the British Steel Corporation's financial history, I wish to make it clear to the House that this order is not connected with the present problems of BSC. If BSC were now on course for achieving breakeven in 1982·83, as planned, we would still be debating this order tonight. This is not, therefore, the occasion on which to debate BSC's current serious difficulties, or the review of BSC's future strategy on which my right hon. Friend the Secretary of State said that he expects to make a statement before Christmas. That statement will provide the occasion for questions about the corporation's future. This order is concerned with the consequences of BSC's past losses as currently reflected in the corporation's balance sheet.
The draft order does two things. First, it reduces BSC's capital by £1,000 million and, secondly, it reduces the corporation's borrowing limit by £500 million, to £3,000 million. The order is being laid in draft under Section 36(4) of the Iron and Steel Act 1982 and will come into operation on 31 December 1982.
I should explain at the outset that the order will not involve the payment of any new money by the Government to BSC. The £1,000 million that is being written off represents past capital advanced by the Government to the corporation. The process of writing off the capital reflects the fact that the money has been used to cover the corporation's redundancy and closure costs, including the writing down of fixed assets, and funding past operating losses. That capital cannot now be recovered.
The reduction on BSC'S capital by £1,000 million completes the capital write-off provided for in the Iron and Steel Act 1981, when £3,000 million of capital and £509 million of long-term Government loans to BSC were written off. Those are huge sums of public money, and they reflect the financial consequence of the losses and the large-scale reduction in capacity and manpower that BSC has undergone during the past four years.
It might be helpful to the House if I were to explain in more detail the purpose of the capital write-off and why it is necessary. As I have said, BSC's capital reconstruction is concerned with recognising and then writing off the consequences of the past. The fundamental problems in BSC stem in part from the massive capital investment programme launched in the early 1970s aimed at increasing BSC's liquid steel capacity to between 33 and 35 million tonnes by 1980. As we all know, since 1974, in the wake of the first oil crisis, the demand for steel has fallen steadily, but it was not until we came to office in 1979 that BSC was allowed to make significant progress to reduce capacity and manpower to reflect the lower levels of demand.
The combined result of the huge capital investment programme and the delay in adjusting to the changed position of the market place meant that by 1979 BSC had far too much capacity, much of it, alas, very modern. It was greatly overmanned, and was making massive losses.

The scale of the adjustment process that BSC has undergone since April 1979 is remarkable. During that period, the corporation has reduced its manned capacity by 7 million tonnes of liquid steel a year. The numbers employed in the corporation have been reduced by about 50 per cent., or more than 90,000. BSC has written down its fixed assets by almost £1,500 million.
The first part of BSC's capital reconstruction, which, as I have explained, took place in 1981, left the corporation's consolidated balance sheet with a revenue deficit of £295 million at 31 March 1981, after the writing off of £3,000 million of capital under the Iron and Steel Act 1981.
During 1981·82, BSC's revenue deficit increased by £504 million to £799 million by 2 April 1982. This increase in the revenue deficit was made up of losses incurred during the year, further fixed asset write-offs and further provisions for redundancies and closures.
As the House well knows, BSC incurred further losses in the half year to 2 October 1982. These losses, together with further provisions, have increased the corporation's total revenue deficit at 2 October to well over £1,000 million. Hence, the Government have deceided to write off the full £1,000 million from BSC's capital provided for in the Iron and Steel Act 1982.
This order will take effect in relation to the figures as at 30 November 1982. The resultant reduction in capital will be reflected in BSC's annual accounts for 1982·83.

Dr. Jeremy Bray: Can the Minister explain why he is writing off £1,000 million instead of taking advantage of section 19(3) and increasing the amount that can be borrowed to £4,500 million" Is he satisfied that BSC's assets should be valued at closed book value, which seems to be the basis for arguing that this write-off is needed?

Mr. Lamont: The basis on which the assets are valued, which I know the hon. Gentleman has raised before in relation to capacity, is explained in the accounts. It is, as the hon. Gentleman knows, a very complicated question because of the current level of capacity and what one expects it to be in the future. As to why we are writing down the capital instead of increasing the borrowing, the hon. Gentleman will appreciate that the assets behind the balance sheet have already been written down. We are adjusting the capital to reflect the commercial decisions that the corporation has already made.
A balance sheet for the corporation drawn up to show the position immediately before the write-off would show the capital of the corporation as standing at £2,932 million. After the write-off, this sum will immediately be reduced to £1,932 million. Similarly, the revenue deficit of £1,407 million will be reduced to £407 million.
The order is to be made under sections 18(7) and 19(2) of the Iron and Steel Act 1982 and requires approval in draft by a resolution of this House. I have already explained that it will come into operation on 31 December 1982, after which date the powers under section 18(7) will lapse.
Article 2 reduces by £1,000 million the total amounts of money paid to BSC under both the 1975 Act and the 1982 Act. By 30 November 1982, £2,237 million had been paid under the 1975 Act and £195 million paid under the 1982 Act, making a total of £2,432 million.
Some hon. Members may have noticed that the figure of £2,432 million differs by £500 million from the figure


that I gave earlier to illustrate the effect of the write-down on the corporation's balance sheet. This £500 million represents the corporation's commencing capital which was deemed to have been paid on nationalisation, and, while it is included in the overall total of the corporation's capital of £2,932 million, the write-off of capital is applied not against it, but against those sums of money paid to the corporation.
Article 3 sets at £3,000 million the total limit up to which BSC and the publicly owned companies may borrow, together with the sums that BSC can receive from the Secretary of State by way of investment. The amount to be written off counts at present towards the borrowing limit of £3,500 million.
Within whatever limit is now established, BSC needs to have available sufficient headroom against which to borrow for some reasonable period in the future. Reducing the borrowing limit by exactly the same amount as the capital write-off would leave BSC with headroom at 30 November of only £345 million. We have therefore decided to take advantage of the flexibility provided by section 19(3) of the Iron and Steel Act 1982 and to reduce the limit by only £500 million, which will allow BSC to borrow £845 million from 30 November without further reference to Parliament.
In conclusion, I should like to emphasise that this further write-off involves no new payment of money to BSC, and BSC will in that sense gain no financial benefit from it. It is an adjustment to BSC's balance sheet to remove certain of the consequences of the past. It does not affect BSC's EFL for the current year or for future years. The future strategy for BSC is currently under review, and, as I have said, my right hon. Friend hopes to make an announcement about decisions on that strategy before the House rises for the Christmas Recess.

Dr. John Cunningham: I thank the Minister for the careful way in which he has taken us through the order. As he rightly said, it writes off £1,000 million of capital debt. That was provided for in the Act that we debated at some length in Committee.
The Opposition will not oppose the order. In general terms it makes sense to bring BSC's capital more into line with the revaluation of the assets. We also welcome the Government's decision not to reduce BSC's borrowing by a similar amount, because in the present financial climate that would have been a mistake.
The Minister said that this was not the time to discuss the wider situation facing the corporation. We understand that he should make that comment, but there is no hope at all that my hon. Friends and I will allow the Government to get away with it. We have chosen to debate the order, even at this late hour, to give the House as a whole the opportunity to discuss the new crisis facing the corporation.
Ironically, less than a year ago this major capital reconstruction was finally agreed by the House, and it involved sums in the order of £5,000 million. We welcomed that because we had believed for some time that such a a capital reconstruction was necessary to put the corporation on a sounder financial basis. However, in a

short space of time and despite the optimism expressed by the Secretary of State for Industry in the spring of this year, the corporation once again tragically finds itself in crisis.
Why has this new financial crisis arisen in the corporation's affairs? At a hearing of the Select Committee for Industry and Trade in the 1980·81 Session, shortly after Mr. MacGregor was appointed, he set out his views about his plan which took into account the coming financial reconstruction, as it was then. In his evidence in volume II, page 44, of the report, Mr. MacGregor highlighted what he regarded as five important points on which the success of his plan depended. It depended, first, on the volume of steel production for a proper utilisation of the plant that would be available: secondly, on a sensible level of prices; thirdly, on the exchange rate; fourthly, on inflation; and fifthly, on what were called cost reduction programmes. Those were all important matters, and directly relevant to the future viability of the corporation.
Unfortunately, in almost every respect, the position faced by the corporation has deteriorated, with the admitted exception of the rate of inflation. Mr. MacGregor's present view, as I understand it, is that continuing decline in capital investment by manufacturing industry in Britain and throughout the western industrial nations as a whole is preventing the corporation from getting anywhere near to the success it had hoped for at the time the evidence was given.
The view expressed by Mr. MacGregor is shared by the Confederation of British Industry, by the Trades Union Congress, by the Labour Party and by my hon. Friends on the Opposition Benches. As demand declines further, as it has done this year, there is in reality little hope of the corporation utilising effectively and efficiently even its existing capacity. We have seen the collapse of prices within the EC and, despite major redundancies and closures, the corporation has returned to financial crisis. It is no surprise that industrial output in the United Kingdom, as we learnt yesterday, is now at its lowest level for 15 years. Manufacturing output is almost 19 per cent. below the level of June 1979. Against the background of falling demand and the catastrophic decline in capital investment which is also well documented, it is not surprising that demand for steel—one of the basic ingredients in any developing industrial economy—has plummeted. Steel output has fallen by almost 31·3 per cent. since December 1981. Those figures are issued by the steel industry itself.
For the first 11 months of this year, steel output was almost 8 per cent. below the level in the corresponding period in 1981. We know that orders have fallen sharply and continue to decline. That decline has been accelerating since March 1982. In addition, imports have undermined our steel industry's position in the home market. Although imports are and will continue to be important, the appalling collapse in demand for steel is the root cause of the corporation's problems.
We now know that the European Commission plans to impose tough new controls on the Community steel industry in an effort to halt the wave of price cutting. According to the Financial Times, it proposes to stamp out discounts that have reached 30 per cent. in some sectors. In Sheffield, Rotherham and so on, we have seen how that discounting, price cutting and cheating on the quota and price agreement have undermined our steel industry in


both the public and private sectors. Unless it is stopped, there will be no hope of the corporation surviving the new crisis.
There is no escaping the fact that the Government's policies, together with the world recession, have brought about that devastating new problem for Mr. MacGregor and the corporation. The Minister has told us before that in addition, structural changes are taking place in the economy. That is true. However, change in the use of materials, set beside what The Daily Telegraph today called the plummet to a new 15-year low in output, is a secondary cause of the corporation's problems.
The Government's policies offer no chance of a recovery in the corporation's fortunes. There is no prospect that the corporation will recover if such policies continue. It is almost laughable to read what the Chancellor of the Exchequer said when introducing the Budget a few months ago. He said that he was introducing a Budget for industry and jobs. In reality, the misery has simply increased. We have seen efficient, modern steel-making capacity—much more efficient than exists and is being maintained in many competing countries—go to the wall. We have seen that at Round Oak in the West Midlands, in South Wales, on Teesside and at Scunthorpe.
It would be a calamity if there were further major closures, particularly at Ravenscraig in Scotland. It would be a catastrophe for Teesside if the Redcar plant were to close. Hon. Members may think that "catastrophe" is too strong a word, but I refer them to the recently published state of the region report, produced by the North of England county councils association. Just as people in Scotland have pointed out how central Ravenscraig is to the Scottish economy, so one can make out the same case for Redcar, Llanwern, Port Talbot, and the plant at Scunthorpe.
I shall mention deliberately, in the presence of the hon. Member for Islington, Central (Mr. Grant), the recent strange behaviour of some of his colleagues from Teesside when they spoke about the steel industry and introduced suddenly as new ideas proposals that had been made weeks earlier by the northern group of Labour Members. They said that Teesside should stay open on the same day that their hon. Friend the Member for Wrexham (Mr. Ellis) wrote in the Liverpool Daily Post:
Two of Britain's five major steel plants must close.
At the same time as the right hon. Member for Stockton (Mr. Rodgers) and his hon. Friend the Member for Thornaby (Mr. Wrigglesworth) were saying that plants must stay open, their hon. Friend the Member for Wrexham was saying that two plants must close. I find that not just incomprehensible, but when I say hypocritical—I am careful not to use unparliamentary language—

Mr. John Grant: I am sure that it is not unusual for the hon. Gentleman to find dissension within the ranks of his party. In this case there may be some dissension within the ranks of my party. The views of the party are clear: the five major steel plants should stay open. I shall make that point clear if I catch Mr. Deputy Speaker's eye.

Dr. Cunningham: I read in a north of England newspaper that the right hon. Member for Stockton and his hon. Friend the Member for Thornaby were rushing back to rally Parliament in defence of the steel industry. They are noticeable by their absence on the first opportunity

they have to mount such a campaign. That has been the case in most of the debates we have had on the steel industry.

Mr. John Grant: Look how many Labour Members there are.

Dr. Cunningham: The almost certain prospect that flows from the pursuit of these policies is that we shall be faced with more major job losses in steel-making communities. That is the reality of the desperate position to which the Government have now brought the steel industry. As my hon. Friend the Member for Motherwell and Wishaw (Dr. Bray) has pointed out several times, the assumptions on which the corporation is now basing its proposals for the future are so appallingly pessimistic that they must lead to further major job losses.
Although the Minister says that he cannot pre-empt the statement of his right hon. Friend the Secretary of State, I challenge him to deny that that is the case. We see no resolution of the corporation's problems unless there are major changes in Government policy.
We have opposed those policies consistently in the House. Although I reiterate that we shall not oppose the order, for the reasons I gave earlier, my hon. Friends are here in some strength so that the Minister is left in no doubt about how strongly we feel about what is happening to the steel industry and to the communities whose livelihoods depend so desperately upon a resurgence of its fortunes.
With losses again mounting, as they have been doing in the past few months; with orders again falling; with a declining share of a declining market, there is no prospect of a return to viability. The road leads to a progressive collapse of the steel industry with the unimaginable misery that that will bring to Scotland, the north of England and Wales.
Whenever the statement on the future of the big five plants is made, the Opposition will want a full debate before final decisions are taken.

Several Hon. Members: rose—

Mr. Deputy Speaker (Mr. Bernard Weatherill): Order. The House can see for itself that a large number of hon. Members wish to take part in the debate, which must end at 1.24 am. I hope that hon. Members will hear that in mind.

Mr. Teddy Taylor: I apologise sincerely to the Minister for missing his speech. I had intended to be present but was delayed at a meeting in the House.
I should like answers to a number of questions before the writing-off of £1,000 million is agreed. How is it intended that equality of reduction of capacity and production within the EC will be achieved? Yet another meeting has recently taken place at which glowing assurances were given. However, since the Government came to power, jobs in the British steel industry have fallen by 80,000, representing over 50 per cent., while the reduction in the rest of the Community has amounted to 50,000. We have cut back to a greater extent than the rest of the EC combined.
I do not doubt the sincerity of the Secretary of State and the Ministers at the Department of Industry. They are among the straightest politicians in the House of


Commons. All the signs are that we play the rules in Euro-agreements while others follow their national pastimes. I fear that the same argument will take place over fishing. If the EC nations stick to the rules that they have agreed, at least three nations' fishing fleets will go bust. How does the Minister therefore intend to ensure that equality of reduction in steel capacity is achieved?
We are debating an improvement to the finances of British Steel. Does the Minister believe that the cartel arrangement of the Common Market makes sense or is consistent with Conservative principles? It astonishes me that the Labour Party should be opposed to the EC when it appears to produce policies that conform to all that a good Socialist would want. Those policies involve protection of jobs for social reasons, plenty of bureaucracy and plenty of money flowing around. For those reasons, I find it difficult to understand how Conservatives can find the Common Market tolerable.
Does the Minister accept that the cartel will develop inevitably into another common agricultural policy? The whole basis of the cartel is that prices within Europe should be higher than those in the rest of the world. Under this arrangement, our steel consumers will be worse off. There will be the choice, as happens in relation to farming, of spending a fortune in dumping cheap steel abroad or, as in the United States, of keeping steel works either closed or working at half capacity to deal with a surplus.
More cartel arrangements are being introduced. There will be one for at least two other industries. It means the extension of Socialism within the EC. Will the Minister at least give the assurance that he will try to bring in the necessary measures to make the cartel work? There have been reports of even tougher rules to prevent price cutting. There were similar assurances before reports were received of cuts amounting to 20 and 30 per cent. The Minister knows what happens. He will find that Italian steel makers will offer a British firm prime products at non-prime prices, or say "Buy a million pounds worth of steel and in your pockets next month there will be a cheque for £150,000 on account of poor quality"—although it is not poor quality.
The Minister knows what goes on. How does he propose, when there is a glut of steel and falling demand, to stop the price cutting, even if there is an army of steel policemen? As long as we have over-capacity and falling demand, even if there is one Euro-steel policeman chasing every salesman, and every telephone is tapped, people will find ways to cut prices and get contracts.
What is being proposed and repeated assurances about the cutting down on price cutting and being very tough to make sure that nobody cheats is not possible to achieve. We shall have to do the one thing that would stop the price cutting—set up a common purchasing agency and a common selling agency for steel within the EC. This would mean that every steel company producing steel according to the quota would have to give it, perhaps through a computer, to a central puchasing agency. That would mean that all the Third world countries that are sending in steel under the voluntary restraint agreements would have to go through this great new colossus in the centre. Anybody wanting to buy steel, no matter how small the quantity, would have to do so through the new colossus. If this is done, cheating could be avoided.
If we carry on in the way that we are going, we shall become more and more enmeshed in a Socialist cartel scheme and will find that, as before, the price arrangements and fixing will begin to be eroded and collapse, and all these bogus arrangements to provide for cutting will happen all over again. I know that we cannot refer, Mr. Deputy Speaker, to the people who are not sitting in the Chamber, but I see smiles on the faces of those in the Galleries, because they know that this is what will happen. What worries people, whether officials or hon. Members, is that they can see the problem coming.
I am sure that we shall return again and again for more write-offs of cash because in no way can the system work. There will probably be a modus vivendi for about three months, but then we shall start again. I appreciate fully the enormous problems that my right hon. Friend the Secretary of State faces, and that we shall be forced into a position, correctly, of keeping steelworks open when we do not have the demand to make them viable. We must do this because, until the Continentals make the cuts that we have made, it would be an outrage for us to cut our capacity.
I have three questions to ask my hon. Friend the Minister. First, how are we to achieve equity when all the previous assurances have not worked? Secondly, does he feel, as someone who knows figures, business and Conservative principles, that a cartel is acceptable to a Conservative? Thirdly, if we are to have this wretched cartel, how does he propose to avoid cheating?

Miss Betty Boothroyd: I am sure that the Minister is a well-meaning individual, but I took exception to his remarks when he tried to tell the House that we should not discuss the plight of the steel industry. It is true that this is a technical order, but it is also a financial order, and I shall talk about the closure of two big works in my area, Round Oak steelworks at Brierley Hill and the London Works Steel at Tipton. In both these cases, investment had taken place. Some of the most modern equipment in the country was in those operations. However, in both cases the Government were incapable of taking effective action to retain steel processing in a part of Britain where the making of iron and steel had taken place for a century. It is nothing less than scandalous that when the closure was announced London Works Steel was the subject of commercial interest by private buyers which was so quickly extinguished by a Government directive.
The Minister referred to investment in the mid-1970s and I want to mention the investment at London Works Steel. That works was composed of two re-rolling mills, of which one was fully renewed in 1974 and the other had £3 million spent on it in modernisation less than two years ago. Therefore, nobody could say that its machinery was decrepit or that the processing methods were out of date. In fact, some of the steel produced in those mills was of a special type. I am told by experts that the method of processing in my constituency has never been operated in any other BSC plant in the United Kingdom. It is a fact of life that those orders cannot be filled elsewhere. They will now go to steel producers abroad. That is yet another gift to our competitors from this Government. It is a gift which has been directly bought by the livelihoods of families who have lost their jobs.
The management of London Works Steel said that the closure was due to the collapse of the British economy—a matter for which the Government must bear full responsibility. However, the management also publicly acknowledged that 50 per cent. of the work's production was exported. The steelworkers' union constantly made the point that investment in the works need not go to waste, that the works need not close. In October a prospective buyer made it known that it wished to enter into discussions to purchase the mills as a going concern. That did not seem to suit the BSC chairman. When approached by the general secretary of the Iron and Steel Trades Confederation with an offer to sell London Works Steel as a going enterprise, he refused point blank to do so. We should know why such an approach was met with a refusal. We need to know why, when commercial interests became involved in a productive operation, there was a refusal by BSC to enter into discussions for the sale of those mills.
It is an amazing state of affairs because it is, after all, the Government's policy to privatise the public sector. It is Government policy to sell public enterprise and to move it into the private sector. Here was a prospective buyer, ready to discuss the purchase of an enterprise which exported 50 per cent. of all it produced, an enterprise which had a unique type of production, where 40 per cent. of its processing could not be repeated elsewhere in Britain. Twice, in representations to the Prime Minister, the general secretary of the steelworkers' union emphasised that and made the obvious point that orders would go to companies overseas if London Works was not allowed to continue in operation.
When BSC refused to involve itself in purchase discussions, the general secretary of the steelworkers' union wrote to the Prime Minister to ask whether the chairman of BSC was carrying out Government policies by his refusal to discuss the sale of the plant as a going concern. In representations to the Prime Minister he said:
It is not too late for this decision to be changed. I would urge that immediate investigations should be made to enable the decision to be changed by the Chairman of the BSC, and that discussions should take place between the would-be purchasers and the London Works management with a view to purchase of the plant as an on-going concern.
Surely the Prime Minister, who regards privatisation as a major plank in her Government's programme, should have intervened and taken up the initiative. BSC refused to enter into discussions. Therefore, there was no alternative but for the prospective buyers to discuss the sale with the London Works' management. That was again put to the Prime Minister and in a letter of 1 November she acknowledged that it was Government policy to encourage privatisation. She said:
Discussions about the sale … should take place with the BSC as owners of London Works and not with London Works management.
On the one hand we have the Prime Minister reaffirming the policy of privatisation, insisting that discussion for sale take place with BSC, and on the other we have BSC refusing to involve itself in any talks and insisting that that should be done directly with the works management.
The steel union's efforts were met not only with glacial indifference by the Prime Minister and BSC but even with hostility. There was total inconsistency in their approach.

The only common denominator was loss of jobs, loss of investment, loss of revenue. It is a policy of sack and smash.
Virtually no steel making remains in the Black Country. Even the lip service that the Government paid to the private sector has been abandoned. Millions of pounds of investment in efficient plant will be cannibalised as various parts are sold cheaply. In the past two years about 66,000 steel-making jobs have disappeared. In the West Midlands the figure is 20,000. In the West Midlands an average of 27 jobs have been lost in the industry each day for the past two years. It was once the most prosperous manufacturing region in the country. Anyone who knows it understands that it takes a great deal of incompetence to make a region that was once prosperous into an industrial invalid. The Government with their financial policies have finally managed it.

Mr. John G. Blackburn: I shall be brief, as many Opposition Members wish to take part in the debate.
I agree with the Minister that we are dealing with a situation that arose when the debts were accumulated. I met Mr. Ian MacGregor on two occasions before he introduced his corporate plan. I stressed the need for tube making and for the private sector to continue. Phoenix 2 resulted from the corporate plan.
Under the Iron and Steel Act we wrote off £.9½ billion. I said then that never again did I wish to be called on to vote to write off such a sum. On sober reflection, I believe that we would all agree that the plan has been an absolute failure. The finance and marketing has failed and the job losses are appalling.
I am always delighted to follow the hon. Member for West Bromwich, West (Miss Boothroyd), who has a deep love for her constituency and for the Black Country, a love that I share. It is remarkable that she chose to speak about the London works, only 10 miles from my home. The private sector offered to continue the work. The hon. Lady stresses the excellence of the work force and the plant. The company exports to a large extent. BSC thwarted the proposal. BSC has spent money to buy shares in the private sector and closed companies. It is morally and politically wrong for taxpayers' money to be used to buy shares in a private company in order to close it and to put men out of work.
A recent example was that of Manchester. 'The Round Oak steelworks dominates my constituency. The same has happened there. Part of the money has been used to buy out the private sector. The ultimate purpose, with a vengeance, was to close the firm.
My contribution will be in the spirit of that by the hon. Member for West Bromwich, West. An impossible task was given to the fine people of Round Oak and myself in that we were given five weeks to close down the plant. Corby was given 12 months and other plants even longer. There are 11 days to go before the plant closes.
I am delighted to announce to the House that this afternoon at four o'clock a firm bid from the private sector was placed in the Department of Industry. Only part is agreed, but there are other interested buyers. I say without shame that I do not care whether my men collect their wages from BSC or from the private sector, as long as they have jobs.
The company invested £8 million in a modernisation programme three and a half years ago. I remember reading BSC's annual report which boasted proudly that 26 per cent. of capacity was by continuous casting and that it would plough its efforts into that. How ironic that tonight it is saying that it will close Round Oak and its continuous casting process.
I shall watch with the utmost vigilance the bid now before the Minister. I want to see whether the same reaction comes from the same BSC board adopting the same policy that caused the job losses at London, could have caused them at Manchester and which, by the grace of God, will not cause them at Round Oak.

Mr. Donald Coleman: The Minister was right to say that the order was financial and technical. He knows now that he was whistling in the dark when he thought that we would talk only about the order's technicalities and financial reasoning and not refer to the crisis in the British steel industry. The crisis is haemorrhaging this great industry into extinction.
The Secretary of State for Wales has not been looking after the Welsh steel industry as he should have done. I shall put on record what has happened to the industry in Wales.
In 1973 Wales had 11·6 million tonnes of steel making capacity. That constituted about 40 per cent. of the United Kingdom total of 28·9 million tonnes. By December 1981 the total steel making capacity in Wales had fallen to 6·75 million tonnes, almost 30 per cent. of the United Kingdom total of 23 million tonnes. The steel capacity in use in Wales was down to 3·5 million tonnes, or 20 per cent. of the United Kingdom total manned capability of 17·4 million tonnes.
Steel production in Wales in 1979 was 6·9 million tonnes which constituted 32·1 per cent. of the 21·5 million tonnes produced in the United Kingdom. In 1981, steel production in Wales amounted to 4·4 million tonnes, which was 28·2 per cent. of the 15·6 million tonnes that was produced in the United Kingdom.
A further blow that we have suffered is reflected in employment in the steel industry in Wales. In 1974, the number of people employed in the steel industry there was 63,700, which was 16·4 per cent. of the total employed—389,000—in the United Kingdom. By 1978, that figure had fallen to 49,000, which was 14·3 per cent. of the then total in the United Kingdom of 343,000. In 1981 there was a further reduction to 24,800, which amounted to 11·4 per cent. of the work force of the BSC in the United Kingdom.
Those figures show that Wales, which has less than 5 per cent. of the total United Kingdom population, has suffered about 33·4 per cent. of the total job loss in the United Kingdom steel industry. It has suffered 42·4 per cent. of the loss of steel production since 1979 and more than 70 per cent. of the loss of steel making capacity.
In recent weeks the BSC has announced further reductions in employment in the industry, totalling about 6,500 jobs. Of those, over 1,300 are due to be lost in Wales. We have taken enough in Wales. I hope that before the Secretary of State makes his announcement, the figures that I have quoted will be borne in mind.

Mr. Peter Hardy: The problems facing our steel industry are largely the result of Britain's moribund economy. What growth there is seems to be related to North Sea oil and gas extraction. Without that, Britain's position would be intolerable by now. Without that, the destruction of demand would have been more obvious. It would also have been obvious that the Government's role was that of principal executioner. The consequences of our present position are disastrous for the steel industry and many industrial areas such as the one that I represent.
The Government believe in only a tenuous relationship with industry. They have largely ignored the weaknesses and crises that our steel industry has faced. They seem to be dominated by the view either that they are powerless to help or that they should not use their power to help, at least until the weakness has resulted in inescapable bills such as the one represented by the order.
This dreadful year of 1982 is the year in which we imported, for the first time in our history, more manufactured goods than we exported. The implications for the steel industry are colossal. The Minister should know that the steel industry in the Rotherham area is as good as in any steel area in the world. We are not seeing rationalisation there. We are approaching a withering. While attention is focused on the five major plants, we have had further redundancies in recent weeks. There were job losses a few days after my hon. Friend the Member for Rotherham (Mr. Crowther) spelt out the case. Three or four weeks earlier, when there was a debate on steel imports, I illustrated the grave needs, yet we have had further redundancies. In its last interim statement BSC stated that £330 million for the cost of closure and redundancy was not included in the figures.
Those comments are true about the private sector. We said earlier this year that what the Government were doing was far too little far too late. I do not know yet whether the Government have made any significant payment under the arrangement that was announced then. If they do not spend the money soon there will be little of the private sector left for the Government to assist. I speak of the private sector, not in the West Midlands but in South Yorkshire. I know that its anxieties are acute, because the Government seem to be unaware of reality.
Only last week, the Government assured me that the monitoring arrangements of Customs and Excise were adequate and that there was nothing to complain about. Yet for months, the Government have had example after example of dumping and misclassification. Our competitors must be laughing as they recognise that they are successfully exporting their unemployment to us. While they are doing that, they are wiping out our industry so that, if there is a recovery here, we shall not be able to meet demand but will have to rely on foreign steel makers to provide the raw materials that the remaining industry in Britain will require.
The Government should learn from the United States. The Americans acted decisively when European penetration of their market reached only 6 per cent. There are parts of the British steel sector where import penetration has reached 70 per cent. and still the Government take no action.
The problem has reached the point where, in my constituency, I am within sight of there being 20,000


unemployed people. The consequent public expenditure cost next year will be well in excess of £100 million. If the Government are worried about public expenditure, let them help industry before it gets into a mess and before people are put on the dole. It may be that any action they take will be too late for those who expect redundancy as a result of an announcement that was made in my constituency yesterday. At BSC chemicals, Orgreave—the tar distillation plant—the head office and the laboratories are about the be closed if a purchaser cannot be found. And the reason given by BSC? Because of a falling market, the capacity is excessive.
The market is falling. It is in decline like the steel industry and Britain. The cause is the Government's policies, which they seem to persist in pursuing. We cannot vote against the order. I wish that we could. We need to be able to record our disapproval of the Government and the foolish policies that they pursue.

Mr. James Tinn: Since our last debate on steel three weeks ago, further heavy blows have fallen on the industry on Teesside and in many other areas of the country. Even while we wait anxiously for news about the fate of the five major steel plants, further massive cuts in the work force have been announced. One thousand seven hundred job losses were announced on Teesside alone. That is more than three times larger than the number announced for any other area, and there is no sign that they will be enough.
It is a sad reflection on what has been happening recently, and the stage that we have reached, that a senior union officer who was interviewed on Tyne-Tees Television after the cuts were announced said that the news was "almost a relief'. Is 1,700 for the dole queues a relief?
In an area such as Eston—one of two employment areas in which the Redcar plant is situated—male unemployment is already 37 per cent. Unemployment in Redcar—the other employment area—is more than 30 per cent. What the union officer meant by the announcement of the cuts being "almost a relief' was that the news was better than the complete closure that had been forecast earlier, and which was mentioned only last week by some members of the Social Democratic Party.
It would be hard to over estimate the anxiety on Teesside now. It is not only the workers who are most likely to be directly affected who are worried stiff by the prospect of closure. All those who depend indirectly on the Redcar plant, shopkeepers for example, and many other people, are worried. Thirty thousand would be a conservative estimate of the number of those who would be caught in the whirlpool of a steel closure at Redcar. The mind boggles and my stomach turns at the prospect.
That is why I welcome the opportunity that is provided by the debate to urge on the Government once again the full extent of their responsibilities and the full magnitude of the crime that would be committed if the worst were to happen.
What is the industry doing to help itself? Once again the steel workers, not least those on Teeside, are cooperating in an exercise which, yet again, will decimate the work force at all levels. Bitterness and despair are there in plenty but so is common sense and cool heads. On

Teesside the corporation has put forward proposals which it believes will give the best chance of retaining the existing facilities intact.
The corporation calls it a far-reaching plan that is aimed at cost savings that would get Teesside to a break-even position on an output of 41,000 tonnes of liquid steel a week, although there is no guarantee that orders will be forthcoming to match even this output. Once again it is calling for massive shedding of men. Numbers are to be cut to 7,500 and many of the cuts will take place by the end of March. Detailed discussions have already started with the unions on a range of cost-cutting proposals, and all these are on top of the economies that had been achieved by March 1982. The House may recall that I mentioned during the previous steel debate that these totalled £136 million over the past two years.
During the earlier debate on steel I spoke with justified pride of what the steel industry at Redcar had achieved until March. At this early hour in the morning, after a long day for us all, I have touched only briefly on what is already being done to cope with the near disaster that has followed the catastrophic surge in imports from countries such as South Africa, Japan and EC member States.
I have been speaking only too inadequately of what has been achieved by men whose lives have been dedicated to the steel industry and whose families are dependent upon it. They have never been feather-bedded and I become angry when a few Conservative Members suggest that they have. They have worked hard in a tough and sometimes dangerous industry. They are working even harder now. They need support—more than is offered in the order—against the unfair competition which earlier this year frustrated their substantial achievements. What still remains of our steel industry is its very roots. They must be preserved for the better days, the revived demand, the spring-time that surely must come after the longest winter that any of us can remember.

Mr. John Grant: I preface my remarks by saying how disturbing I found the comments of the hon. Member for Dudley, West (Mr. Blackburn), which deserve a great deal of attention.
I was sorry that the hon. Member for Whitehaven (Dr. Cunningham), the Opposition spokesman in this debate, spoilt what was otherwise an extremely sensible and relevant speech by rather petulant and petty remarks about some of my right hon. and hon. Friends. When he made those remarks, there were only nine official Opposition Members in the Chamber, despite all the Labour Party's steel constituencies. There are only five present now. There were three Conservative Members and two alliance Members. I do not think that any party has a great deal to boast about when it comes to attendances.
Clearly it would be wrong to oppose the motion. The order allows the Government to write off another £1 billion by the end of March next year if the BSC losses continue at their present rate, which is about £1 million a day. It seems that the Government will have to bail out the corporation again. I hope that they will assure us that that will, if necessary, take place.
We are entitled to consider the background to the order, which is not merely bleak but catastrophic. It is unfortunate that the debate is taking place without our having the advantage of knowing the Government's decision on the big five steel plants. What is especially


disturbing is the dismal approach or the random cuts that are pre-empting the decision that we are told is imminent. During the past few weeks, about 6,000 job losses have been announced. We shall in that way end up with far more redundancies than we would with a major closure, unwanted though that may be. There seems to be a deliberate continuation of the trend of recent years during which the work force has shrunk remarkably.
I do not expect the Minister to answer many questions tonight, but perhaps he can tell the House whether we face an accelerated redundancy programme across the corporation as the price for keeping open some plants. Will parts of BSC be auctioned to shore up finances? Despite this order, there are suggestions of privatisation of the oil platform building yard in Scotland, of chemical interests and of the special steel business in Sheffield. I hope that there will be clear answers in the Government statement that was promised by the Prime Minister for early next week.
I hope that the Minister will tell us tonight about his view of the prospect of meeting the 1985 deadline for the Davignon plan, by which time all State aids for the steel industry will be abolished and the European market will be stabilised. That may be a worthy aim, but the target date increasingly seems like a pipe dream. I do not question the policy, but the problem will be putting the aims into practice. The simple fact is that our restructuring has not been matched, even remotely, by our European partners. Their higher import penetration—this is the Government's view and one must accept that it exists—has been matched by higher compensatory levels of exports.
We must also discuss the imports from third countries, which are becoming a fiasco. I am talking about third countries and not Third world countries, because there is sometimes a misunderstanding about that. I am talking about Japan, Spain, South Africa and some East European countries. The European Community's price and quota regime is inadequately policed. The Government have said that a bundle of new measures is on the way and that they propose to stop the cheating. We must hope that those measures will prove effective, but they are still only proposals.
We must also hope that, for a change, other European steel producers will meet the latest Davignon plan for reduced capacity and that our past efforts are fairly reflected so that we are not conned again. Even if all the proposals are carried out, the Steel Industry Management Association's forecast is that during the second quarter of 1983 there will be a flood of third country imports into Europe, which it fears could wreck the Davignon plan. The association fears that we may once again be the only country that makes real cuts and that dumped imports will undermine our position even further.
The association is deeply involved in the industry. Its view suggests to me a marked lack of confidence in the Government's political willpower, which is a sorry comment on the Government. There is a vicious circle through lack of demand and less steel and energy being used. There are knock-on effects. I am told that BSC's capital development programme for 1983–84 has been delayed so that only a negligible amount of steel pipeline will be required next year, compared with the past, so much so that everyone working in that part of the industry has been told to do what he can to find overseas

consultancy work to make up the leeway. I hope that the Minister will pass on those comments to his colleagues at the Department of Energy.
There can be no doubt that the key to the steel industry's future is for the Government to take immediate steps to generate a national economic recovery. We require a prompt reflationary package for small manufacturing industries, which, by any yardstick, are in a state of acute depression. But even if the Government drop their doctrinaire refusal to opt for economic common sense, the effect will take some time to work through. My right hon. Friend the Member for Stockton (Mr. Rodgers) has proposed a moratorium on all steel closures for 18 months. We know that there would be a high cost in that respect, but it is fair to point out that other industries enjoy direct subsidies of a kind that the steel industry does not.
I feel sure that the Minister will not be able to offer any cheer tonight and that this order must go ahead. However, the necessity for it is another indication of the overall failure of the Government's economic policy.

Dr. Jeremy Bray: My hon. Friends and Conservative Members have spoken of the social devastation and the industrial vandalism being wrought in the steel industry today. It is an act of industrial destruction such as Hitler was never able to achieve, and it is all in pursuit of what I believe to be an economic and arithmetical mistake on the part of the Government.
I am not talking about the general economic assumptions made by BSC, which were proved wrong before the ink was dry on the paper on which they were written. Instead, I want to talk narrowly about this order, and the effect that it has on the BSC balance sheet. There is a case for writing off the accumulated revenue losses which, with redundancy and closure costs, now amount to well over the £1 billion reduction in indebtedness which this order will make.
The advances under section 18 of the 1982 Act and the preceding Acts are intended to finance investment as well as operating losses. We must look at the assets which are the counterpart of that indebtedness. The valuation of those assets in the annual report shows that they are recorded at original cost less accumulated depreciation, even though the replacement values may have escalated three or four times since the plants were built.
The closure of any of the big five would cost, not the £200 million to £300 million about which the press talks, but well over £1 billion apiece. Therefore, the cost of the operating losses in maintaining any one of those big five plants, at, say, £50 millions a year, is the cost of preserving in usable form a capacity that is worth well over £1 billion. The operating losses are small in relation to that. It is not only good accounting practice but good political practice that the assets of the nationalised industries should be valued at their replacement costs.
The Department of Industry is responsible for the immoral practice of allowing the British Airports Authority the opportunity of revaluing its assets at replacement cost, and the excessive profits are stashed away so that nobody can see what is going on. If, however, because of economic difficulties and inevitably high operating losses, the Government want to cook the books so that the losses appear small, the assets are not revalued


at replacement cost. As with the British Steel Corporation, we are told that the assets are valued at original cost less accumulated depreciation.
If cost comparisons are made with other countries, particularly with Italy where money disappears when it is paid out by the Government not only to the steel industry but to many other industries, there could be unfair cost comparisons between Italian costs and British costs in arguments about levels of subsidies and so on.
The answer to the problem is quite straightforward. The British Government can make a fairly standard valuation of the replacement costs of steel capacity anywhere. Those are the capital values against which the depreciation and interest charged can be calculated in arriving at the level of subsidy and deciding whether overseas plants are operating profitably.
Accounting practices are different among Community members, and there is no possibility of aligning those in the short term. However, in dodging the issue, the Government are hiding the nature of the decision that they are about to take on the major capacity in the basic core of the steel industry.
Customers are paying too little for steel—

Mr. Teddy Taylor: Rubbish.

Dr. Bray: —and the cash flow from depreciation in the steel industry should be available, if not for new investment in steel, at least for creating new jobs in the steel areas, because the capital investment required to allow basic industrial capacity to move into new industries will be no less than that required for the steel industry. Therefore, the Government—perhaps successive Governments—are grossly misleading themselves, steel customers and Parliament about the the true nature of the costs and the decisions that they are facing.
This is a serious matter, and I hope that the Minister will explain both what the Government plan to do and what consideration they have given to the replacement value of the assets that they are so wantonly scrapping.

Mr. Bill Homewood: I have only a few minutes at my disposal, as it is the wish of the House that the Minister should have an opportunity to reply.
I rise only because of the unsatisfactory end to our most recent debate, in which not one hon. Member was supportive of the Government's position. Indeed, the ministerial reply was complete and utter waffle and none of the points made by hon. Members was answered.
The hon. Member for Dudley, West (Mr. Blackburn) and my hon. Friend the Member for West Bromwich, West (Miss Boothroyd) talked about efficient plants that I know well and which have gone to the wall in the face of unfair competition.
In our recent debate, I was looking for simple answers. The arguments of the hon. Member for Southend, East (Mr. Taylor) are often convoluted. He seems to believe that there is some sort of "cartelised" Socialism within the Common Market. Like the hon. Gentleman, I wish that we would get out of the Common Market, but it is a load of nonsense to believe that there is some sort of Socialism within the steel industry cartel.
If the Government argue that productivity in the steel industry should be the same as our overseas rivals, if they then admit, as they have done time and again, that

productivity in the United Kingdom now equates with Europe, and if wage levels here are well below those in Europe—something that they never deny—how can they argue that we are not competitive? How can it be argued that some other force enables our overseas competitors, particularly in the EC, then to undercut us in the home market?
Exports continue to increase not from third countries as has been suggested—those exports will be a menace in the future, but they are not at the moment—but from the Common Market. We should be flooding the Continent because of our competitive position. Productivity is equal and wages are lower. What other elements are there? Our competitors know which elements are different. They know that there is a higher subsidy on every type of steel from the EC. They know that we are bottom of the league for electricity subsidy, for coal subsidy, for gas subsidy and for freight subsidy. That is the difference. They know that sterling is overvalued, no matter how they criticise our policies for bringing sterling down. They know that it is too high. They know that, no matter what our workers do, we cannot compete with the Common Market in steel. It is not free trade but unfair trade.
That is why Round Oak is closing. That is why the London Works Steel Company closed. It does not matter whether we close a large steel works because we know that within the next 12 months 25,000 to 30,000 more jobs will be lost in the steel industry. Those jobs may be lost at one works or 6,000 jobs may be taken from each of the remaining five works.
I have to go back to my constituency and try to explain to those people that one of the most modern steel works in Britain cannot compete because it is undermined by unfair trade. Those responsible should answer for that and not me.

Mr. Norman Lamont: I did not mean that the House should not raise under this order any matter that it wished to. In my introductory remarks, I meant merely to make it clear that I cannot anticipate what my right hon. Friend the Secretary of State will say in his statement which will be made within a few days. He will wish to address his remarks to many of the points that have been raised.
My hon. Friend the Member for Southend, East (Mr. Taylor) asked three questions about the EC regime. He asked, first, how we envisaged that other countries would be made to cut their capacity in line with ours. What we have on our side is that aid by individual Governments to their steel industries has to be authorised by the Commission. We have made it clear to Commissioner Davignon and Commissioner Andriessen that we expect the Commission—we have every reason to believe that the Commission agrees with us, as this is its policy and not just ours—that State aids should only be approved where there are reductions in capacity in line with what the Commission sees to be required in Europe.
We have made it clear that we expect other countries now to carry the burden of adjustment. My hon. Friend asked how I reconciled the principles of a cartel with Conservative policy. I answered that question when I spoke in a previous debate. I told the House that I found it ironic and surprising for a Conservative Minister to be presiding over a cartel. A cartel will not necessarily last forever. A cartel only makes sense provided that the policy


of raising prices is accompanied by reductions in capacity. It would be a nonsensical policy unless it went hand in hand with measures to reduce capacity.

It being one and a half hours after the commencement of Proceedings on the motion, MR. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 3 (Exempted Business).

Question agreed to.

Resolved,
That the draft British Steel Corporation (Reduction of Capital) Order 1982, which was laid before this House on 6th December, be approved.

CONWY TUNNEL (SUPPLEMENTARY POWERS) BILL

Ordered,
That, notwithstanding the proviso to Standing Order No. 62 (Nomination of Standing Committees), any Standing Committee appointed for the consideration of the Conwy Tunnel (Supplementary Powers) Bill shall consist of Seventeen Members, including not less than Twelve Members sitting for constituencies in Wales.—[Mr. David Hunt.]

Isle of Wight (Economy)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. David Hunt.]

Mr. Stephen Ross: I am glad to have this opportunity to raise the subject of the Isle of Wight's economy. I have worked and lived there for about 30 years and I have never been more concerned about its future well-being than I am today.
We have just heard a debate on the steel industry. Several hon. Members who took part represented the West Midlands and the North-East. However, of all the regions in Great Britain, only Wales has had a marginally higher proportionate fall in manufacturing employment than the Isle of Wight. Even the decline in the West Midlands is less than that which has taken place in my constituency. Apart from those who spend their retirement years with us—I do not discount in any way their most valuable contribution to our local economy—we largely depend for our livelihoods on three main sources: the manufacturing, construction and service industries-agriculture, including horticulture, and the tourist trade.
Agriculture is doing passably well, but our efficient, hard-working glasshouse producers, most of whom came to the island only in the 1950s and 1960s, have had a torrid time, and that is still continuing, principally because of the high cost of fuel—largely oil—extortionate interest rates, and unfair competition from the Dutch. Some producers have already gone out of business; others survive by their very boot straps.
The tourist trade is in the doldrums. I am told that the number of visitors has fallen by about 10 per cent. per annum since 1979. That industry desperately needs new investment and a longer season. Most serious of all is the decline in our manufacturing industries, all of which are modern and employ some of the most skilled craftsmen and women to be found anywhere in the United Kingdom. A substantial number of those firms were attracted to our shores in the late 1950s and early 1960s with the aid of Government grants, following the sudden demise of Saunders Roe—a famous name in the aircraft world—which now trades as the British Hovercraft Corporation, a subsidiary of the Westland Group. The cancellation of a rocket plane brought with it many redundancies, the realisation that we had too many eggs in one basket, and ultimately, Government aid.
With that aid, some famous names came to the island such as Plessey, Ronson, Millway Engineering—now part of Thorn EMI—Trucast, and Temperature, which is part of the Norcross group. They are some of the firms that came to the island at that time and that generally prospered until recently. The famous old naval shipyard of J. S. White, which is, I believe, the oldest shipyard in the United Kingdom, built destroyers until the early 1950s. I believe that one of its ships went to the Falkland Islands. However, it was acquired by the Karrier Corporation of America, and was transformed into a heavy engineering company, specialising in compressors for the oil industry. It was taken over in the late 1970s by United Technology, and later became part of the Elliot Turbomachinery empire. Today, it no longer exists. Indeed, 12½ acres have been closed, and its fine work force of more than 800 has been spread throughout the world. However, many of its old employees remain on the Isle of Wight, without work.


There have not been any other closures of that magnitude. It was traumatic, because it affected the whole area. Small firms would use its facilities for all sorts of things. Unfortunately, the British Hovercraft Corporation has reduced numbers from 2,200 to 1,500 and has a virtually empty order book. If only the Navy appreciated the true value of the hovercraft, the tale might be different.
Plessey's has had to start laying off men as it cannot hold on to its full work force any longer, despite the imminent expectation of a major NATO order. It employs about 1,200 people, but 25 people or more have already been made redundant. Temperature is shedding 80 workers, due to the lack of work from British Rail for underfloor heating and thermostatic controls. The Government could certainly help. The Thorn factory at Carisbrooke shut its door last week, with the loss of 230 jobs, mainly female. Fortunately, it took back 50 workers this week for a limited six-month period.
Brittan Norman, of which I am a non-executive director, is facing further redundancies as orders for the Islander dry up, despite frantic attempts to secure new contracts and approaches to the Department of Industry for financial assistance for research and development of a variation. Even the extraordinarily inventive Cowes Laundry is closing. It used to keep two launches in the harbour to serve the liners and tankers berthing at Southampton and Fawley. The boat building industry has been depleted. It is hit by low-wage competition from overseas, although it has had some remarkable successes. It is laying off people at the moment.
The latest blow is the threatened loss of 18 jobs at the famous Niton radio station which faces the English Channel. The radio station is to be automated. Apparently rescues around the coast are to be directed solely from Burnham in Somerset and Stonehaven in Scotland.
The greatest tragedy, and the one over which we have apparently no control, is the closure of the Ronson factory outside Newport. After two receiverships, the number of employees at this always profitable factory have been reduced from about 400 to 80. The factory was closed at one stage. There is a ready market for its products and the most likely purchaser is almost certain to close it down and remove it, lock, stock and barrel to the North-East, due to the availability of British Steel fund loans, Tyne and Wear assistance and ICFC co-ordination. A figure approaching £1 million is involved. We on the island must sit by and watch it happen. We are not an assisted area and therefore have no source of funds to match what the North-East can offer. Yet everyone, including the prospective purchaser, agrees that the productivity in the Isle of Wight factory is the highest anywhere, as it was when Ronson International was a world-wide business. The factory will produce three and a half lighters for the one and a half produced elsewhere.
This position makes us angry and it hurts. As an offshore island we are vulnerable to present conditions. We are not sitting down and doing nothing about it. With help from private industry and the county council, we have established an enterprise agency, which I have the honour to chair. A small amount of county council funds has been made available to help worthwhile causes. Our resources for the current year are only £150,000 and we may not be able to repeat that next year. The product of a penny rate in the Isle of Wight county is just over £130,000, and that is why we can do so little.
We have appointed an outstanding entrepreneur, Mr. Alan Curtis—I am sure the Government will approve of that—to help promote the island and seek new investment, but it is an uphill struggle. I am conscious of the fact that when I go abroad few people know about the Isle of Wight. I am always hearing about the Isle of Man and Ireland, but the products of the Isle of Wight receive little publicity.
For those reasons, on 13 September we submitted a detailed case to the Department of Industry asking for assisted area status. We gave our current unemployment figures and our woeful predictions for the future. I can now bring the Minister up to date. As at mid-November, the percentage of unemployed people on the Isle of Wight was 14·9. That was taken on the new basis. The average for the United Kingdom is 13 per cent. There were 4,520 males and 1,724 women out of work. That figure is, regrettably, substantially higher today.
A report made by one of our officers to the appropriate committee the other day said that it was difficult to estimate what the level of unemployment would have been but for the change in the method of counting, but it could have been an additional 250 to 300.
The rise in unemployment would have been greater but for the fall in the number of young people claiming benefit as a result of an increase of 70 in the number of participants in the youth opportunities programme. There are 666 taking part compared with 586 in 1981. That conceals a further increase in adult unemployment.
The figures take no account of 80 redundancies at Temperature, 25 at Plessey, the closure of Thorn EMI, the closure of a construction company with the loss of 25 jobs and even the loss of 18 jobs at a local cinema. There have been 378 jobs lost since November. In Ryde male unemployment stands at 25½ per cent. In Ventnor it is 33·3 per cent. Those are rises of 9 per cent. and 13·2 per cent. respectively over the same period last year, taken on the old basis.
Those are startling figures. They will be higher today. By common consent, it is agreed that our case was well argued. We were therefore bitterly disappointed to hear the response of the Minister of State, Department of Industry on 12 November. What upset us most was the refusal even to see a delegation from the county council which I had the honour to lead. Some of the comments in the Minister's letter show how necessary is a personal presentation to back up our written report.
Severance by sea is a severe handicap to manufacturing industry and tourism. The cost of taking a car with passengers to the Isle of Wight in mid-season is £30 or more. Medium-sized lorries cost more than double that amount. When times are hard, these factors count heavily. Our problems are not simply cyclical. We do not derive much advantage from our claimed proximity to London and European markets when one considers the ferry costs. For the letter to state that assisted area status would give the island an overwhelming lead in the competition for new industrial investment and that it would be unfair to our Hampshire neighbours is poppycock. I put that point to representatives of Hampshire borough and district councils when they met at the House a few weeks ago. None feared that we would gain an unfair advantage if given financial help.
The great prize for us would be qualifying for EC loans and grants. We look with envy upon places such as Cardiff and Rhyl when there is a desperate need for up to date facilities at Cowes to retain the prestigious Admiral's Cup


and to provide an all-purpose leisure centre at Shanklin. Cowes is in trouble. I have been visited by many people connected with the yachting industry and also by traders who want to see facilities improved. We want to remain the premier yachting port of the world. We fear, however, that the Admiral's Cup, which is of great importance, will be lost to us if modern facilities are not provided.
Our sewerage system is a disgrace. This year, probably for the first time in living memory, East Cowes and West Cowes will even lose the chain ferry for up to two months. There is only one left. It is due for refit sometime in March. The islanders are resilient people. We shall fight back. Too many skilled men and women are now idle or travelling long distances to work on the mainland, some to Marconi and other places in Southampton. They are entitled to something better and nearer at hand. What future exists for about 17,000 school children mostly born and bred on the island? A shot in the arm from the Government could work wonders. It would encourage us to seek with even greater zeal our own solutions.
We cannot achieve what we seek on our own when the odds are stacked against us. The Ronson example is typical of our inability to attract new industry in the face of tempting offers from elsewhere. The Welsh Development Agency, for instance, carries advertisements week after week. At the county council meeting yesterday morning, I asked for and obtained unanimous all-party support for a resolution asking the Secretary of State, the Minister of State or the Under-Secretary of State to think again about the refusal to see a small, representative delegation. If, through this debate, I can obtain that concession, it will have been worthwhile.

The Under-Secretary of State for Industry (Mr. John MacGregor): I congratulate the hon. Member for Isle of Wight (Mr. Ross) on obtaining this opportunity to debate the economic problems of his constituency. I am grateful for the opportunity to respond to the points that he has made about assisted area status. I appreciate that the island has difficulties because of its location. I shall come to that later in my speech. I also recognise that its economic situation has deteriorated in the course of the world-wide recession, particularly with the loss of two of the largest manufacturing companies on the island.
One should not over-emphasise those difficulties relative to other parts of the country. The industrial structure of the island is now better balanced than it was in the 1950s when the economy was heavily dependent on Government contracts and when, for a short period, it was a development district attracting financial incentives.
The hon. Member has mentioned a number of the redundancies and closures that have taken place on the island. In the recession, companies are ensuring their longterm viability and competitiveness by rationalising their productive capacity. I accept that it is extremely distressing for those who lose their jobs, but to some extent it is part of the price that we are paying for failing to have been sufficiently competitive, adaptable and innovative overall as a nation in recent years, and before 1979. It is no good asking the world to stand still. We have to adapt now.
The Thorn-EMI closure is one aspect of this. I understand that the company has attributed the closure to

new technology requiring rationalisation of operations as well as falling demand, perhaps partly because of the changing technology and hence changing product demand, as well as the world recession.
The hon. Gentleman also referred to Ronson Products. I shall look into that matter and write to him about it. As I understand it, part of the reason for this has been that smokers have changed to cheaper and in some cases disposable lighters.
The world recession has hit the manufacturing sector particularly severely, and the island is at least fortunate in that it is less dependent on the manufacturing sector than many other parts of the United Kingdom.
That leads me to the hon. Gentleman's plea for assisted area status for the Isle of Wight. I know that in September he sent my right hon. Friend the Secretary of State a submission on behalf of the county council requesting assisted area status for the island, and the hon. Member has repeated that request this morning.
I think it would be helpful if—as I usually do on these occasions—I were briefly to remind the House of the statutory criteria against which decisions on assisted area status have to be taken. The Industry Act 1972 specifies that the Secretary of State, in designating an assisted area, shall have regard to
all the circumstances, actual and expected, including the state of employment and unemployment, population changes, migration and the objectives of regional policies".
In practice, this means that the rate of unemployment is a very important consideration, although it is not the only one. The nature of the industrial problems facing the area must also be considered, as must its location relative to the rest of the country. The sheer distance of some areas from resources and markets can be an important factor in an area's problems. The "traditional" assisted areas that are all remote from London and the South-East clearly demonstrate this point.
inally, we must have regard to
the objectives of regional policies",
which can be effective only by attracting investment to the areas of greatest need, a point that should be emphasised. When we came to office, 44 per cent. of the working population was in assisted areas. The aid was being spread too thin and was clearly proving ineffective. We therefore introduced a programme of phased reductions in the assisted area coverage, to some 27 per cent. now.
As the hon. Member will know, the final phase was effective from August of this year. Having corrected these anomalies, we attach great importance to the stability of the programme. My right hon. Friend the Secretary of State made it clear to the House in his statement on the assisted areas review that we undertook this summer that there will be no further changes in the assisted areas during the lifetime of this Parliament except in the most exceptional circumstances.
It is in the light of these factors that we must consider the specific question of assisted area status for the Isle of Wight. I know that the hon. Member mentioned individual towns in his constituency, but he will know for reasons that we have frequently spelt out—as we have all Governments—that travel-to-work areas are the basis for assisted area status.
I accept that the island's unemployment level continues to rise, but this is a reflection of the problems facing the whole of the country in the face of the world-wide


recession. Britain's particular problems of a general decline in competitiveness over many years has made it so much more difficult to combat the recession.
Nevertheless, as the county council recognised in its submission, the island's average unemployment rate has remained at or around the national average for the past three years. I am aware that in the winter months it is usually above the United Kingdom average, as it is now. However, in the summer months it is below that average rate, as one would expect from a county which, as the hon. Gentleman has fairly said, is considerably dependent on tourism. However, it is significant that even now in December the provisional unemployment figure of 14·9 per cent. is well below the intermediate area average—intermediate area status is the lowest level of assisted area status—which stands at 15·8 per cent., on the same basis as the 14·9 per cent.
As I have said, unemployment is not the only factor. Location is another important consideration, and one on which the hon. Gentleman focused some of his comments tonight. The Isle of Wight is in a quite different position from any of the current assisted areas. I accept that severance by sea causes particular problems and affects travelling and transportation costs. However, the degree of isolation and the additional costs involved are comparable with many other non-assisted areas of Britain. Therefore, one must take into account other factors such as the relative level of unemployment.
We must also consider the nature of the island's problems. An important question is whether the area is undergoing a difficult period mainly as a result of short-term recessional problems, or whether it is undergoing a profound structural change. That is always the most difficult question to answer, and I have often said that to some extent it is more an art than a science. However, in my view, the island's problem is primarily recessional. I do not see it as a problem on the scale or nature of those faced by the assisted areas which now have development or special development area status.
Finally, it is necessary to put the question of assisted area status in the regional and national context. At a time when recessional unemployment is particularly high, and when parts of the West Midlands are suffering unemployment rates far higher than those of the Isle of Wight, higher even than those of some assisted areas, the problems of the island are not unique. I need hardly remind the House that unemployment in Telford new town now stands at 19·7 per cent., in Wolverhampton at 16·9 per cent. and in Birmingham at 16·2 per cent. Yet we have resisted the idea of assisted area status for those travel-to-work areas.
In the national context, it is important for the hon. Gentleman and his county council to consider what I have sometimes described as the domino effect. I know that in the submission that I have here the county council has stated that Isle of Wight rates
although marginally below the average for Assisted Areas at present, are within the range for such areas.
It went on to say later:
The small size of the Isle of Wight would not dilute Government Assisted Area Policy and its uniqueness as an offshore Island county would not create a precedent for designating other areas.
I can assure the hon. Gentleman that, having received many deputations from other parts of Britain, there are many other non-assisted areas which would plead special reasons for their being considered to be assisted. I do not

think that they would accept that the small size of the Isle of Wight would in any sense prevent them from claiming assisted area status if it were granted to the Isle of Wight. Given the relative levels of unemployment, the hon. Gentleman must accept that many other assisted areas would claim that they should achieve such a status, too. At the very least, it is questionable whether as a result of that the Isle of Wight would be better off.
Therefore, I am clear about the conclusion that I must draw on the question of assisted area status for the Isle of Wight. I fully accept that the island is suffering from the current recession, but in national terms the island's problems are well down the league table. The traditional assisted areas are suffering from far higher levels of unemployment. In addition, they have on the whole more serious locational problems than the Isle of Wight. I must have regard to the effectiveness of regional policy throughout the areas of greatest need and, therefore, I am not persuaded that the granting of assisted area status to the Isle of Wight would help the county in relative terms. On the other hand, it would undermine the effectiveness and concentration of regional policy on the areas of greatest need.
For those reasons, as my hon. Friend the Minister of State made clear in his letter to the hon. Gentleman on 12 November, from which the hon. Gentleman has quoted, we cannot agree to the Isle of Wight becoming an assisted area at present unless there is clear evidence of persistent and long-term structural decline leading to a much higher degree of permanent unemployment relative to other parts of the country. I do not believe that that evidence is present at the moment.
As I said, my right hon. Friend the Secretary of State made it clear when he announced the last review of assisted area status in the summer that we believed that it was important not to make further major changes in assisted area status or regional policy in the lifetime of this Parliament because of industry's need for continuity and stability in long-term planning. It would not be fruitful to meet a delegation at this time.
The hon. Gentleman quoted a sentence from my hon. Friend the Minister of State's letter to him about areas with comparable circumstances claiming assisted area status. The hon. Gentleman referred to Hampshire. That is not the best analogy. We were thinking of other travel-to-work areas with levels of unemployment and locational circumstances similar to those of the Isle of Wight.
The rejection of the island's case for assisted area status should not be regarded as a crucial element in the Government's policy. Often by overemphasis on assisted area status other aspects of assistance are overlooked. The Government have taken various steps to assist industry from which the island should benefit.
The hon. Gentleman mentioned tourism. In August the Secretary of State for Trade announced that the selective financial assistance for tourism, operated by the English tourist board under section 4 of the Development of Tourism Act, would no longer be confined to assisted areas. The funds may now be used to generate tourism investment wherever the best projects exist. I am delighted to say that the island has been quick to reap the benefits of this change. Indeed, the first grant to be made outside an assisted area was a grant of £30,000 towards improvements at the Sandringham hotel in Sandown. The island has also benefited from the grant in the current


financial year or £73,000 to the Southern tourist board for promotion and publicity of the tourist attractions of the area.
I should also remind the hon. Gentleman and the county of the extent of industrial support available to firms on the island. This takes the form of aid under section 8 of the Industrial Development Act to assist with new investment in the national interest that would not otherwise take place. Since May 1979, there have been six offers of assistance to companies on the island. In addition, grants are available under he support for Innovation schemes on which the Government have committed £140 million. Already six firms on the island have benefited from the schemes with about £200,000 of assistance.
There is often a lack of awareness of such schemes and of the assistance available to small firms. I hope that the hon. Gentleman will do all that he can to promote such schemes on the island and to ensure as big a take-up as possible.
I appreciate the fact that the hon. Gentleman's immediate anxiety must be for those of his constituents who are currently unemployed. In order to provide support and training for those people, the Government have introduced a variety of employment schemes. They include the youth opportunities programme under which

666 people on the island are assisted; work experience in employers' premises under which 342 are assisted; community projects under which 56 are assisted; the youth training scheme under which 149 are assisted; short training courses, where the number is 119; and the young workers scheme under which 347 are assisted and which is important for small firms. I could go on. These schemes should show the extent of Government support, particularly to the young. They should help to ensure that the island has a work force that is better placed to take advantage of the opportunities when the economic upturn comes.
I am sorry that I have not been able to accept the hon. Gentleman's arguments for assisted area status which he has so forcefully presented. I am sure that he will understand that the Government must have regard to the areas of greatest need. I hope that the hon. Gentleman will recognise the many other ways in which the Government are assisting, only some of which I have been able to mention, including the provision of premises for small firms through the Development Commission. I hope that the hon. Gentleman will do all that he can to draw the other schemes to the attention of firms in his constituency to help solve the problems to which he has rightly drawn attention.

Question put and agreed to.

Adjourned accordingly at six minutes to Two o'clock.